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The Role of Bilateral Donors inFighting Corruption
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iii
The Role of Bilateral Donors inFighting Corruption
April 25–27, 2000Maastricht, The Netherlands
Edited by
Lara M. Gabriel and Rick Stapenhurst
with Mary Thomas
iv
The findings, interpretations, and conclusions expressed in this document are entirely thoseof the author(s) and should not be attributed in any manner to the World Bank, to itsaffiliated organizations, or the members of its Board of Executive Directors or the countriesthey represent.
Copyright © 2001 by the International Bank for Reconstruction and Development
The World Bank enjoys copyright protection under protocol 2 of the Universal CopyrightConvention. This material may nonetheless be copied for research, educational, or scholarlypurposes only in the member countries of the World Bank. Material in this series is subjectto revision. The views and interpretations in this document are those of the author(s) andshould not be attributed to the World Bank Institute or the World Bank. If this is repro-duced or translated, WBI would appreciate a copy.
v
Contents
Foreword ........................................................................vii
Preface ........................................................................... ix
Introductory Remarks ..................................................... 1
Opening Speech:
Corruption Distorts Development Investments ................................ 3
Eveline Herfkens
Opening Speech:
The Role of Bilateral Donors in Fighting Corruption ....................... 9
Mats Karlsson
Improving Governance and Controlling Corruption:
New Empirical Frontiers and the Case for Collective Action .......... 17
Daniel Kaufmann
vi
Background Reports ...................................................... 51
Donor Guidelines
Procedures and Guidelines of Donor Agencies to
Prevent and Suppress Corruption .................................................... 55
Sahr Kpundeh
How to Prevent Corruption in Development
Aid-Funded Projects and Programs ................................................. 71
Per Øyvind Bastøe and Mette Masst
Preventing Corruption in German Financial
Cooperation with Developing Countries ......................................... 79
Martin Dorschel
Transparency in Procurement .......................................................... 85
Michael H. Wiehen
Donor Coordination
Improving Coordination of Anti-Corruption
Policies and Activities by Donor Agencies ....................................... 97
Jeremy Clarke
Use of Data Collection, Statistics, and Monitoring Mechanisms
Monitoring Corruption: An Outline of Selected Issues ................. 117
Ugljesa Zvekic
vii
Institution Building
Institutional Approaches to Combat Corruption:
Suggestions from Bilateral Technical Cooperation ........................ 127
Albrecht Stockmayer
Kabinja: A Case Study ..................................................................... 147
Patrick Conway and Rick Stapenhurst
Supreme Audit Institutions and Their Role
in Fighting Corruption ................................................................... 167
Wilhelm Kellner
Terms of Donor Engagement
Terms of Engagement for Bilateral Donors:
A South African Perspective From Civil Society ............................ 181
Lala Camerer
Terms of Engagement: Towards Strategy andGuidelines
for Donor-Recipient Interaction Against Corruption ................... 203
Steven Langdon and Heather Baser
Best Practice Guide and Bad Practice Warnings ............................ 223
Glynnis Davies
The OECD Convention and Its Impact on Future
Anti-Corruption Strategies
The OECD Convention and Beyond:
The Supply Side of the Development Aid Business ....................... 243
Hansjörg Elshorst
Contents
viii
Recommendations ....................................................... 255
Combating Corruption in Development:
A Statement by the Utstein Group .............................. 273
Conference Participants .............................................. 287
About the Contributors ............................................... 301
ix
Foreword
ON 25 AND 26 JUNE 1999, the Ministers for Development Cooperation of
the Netherlands, Germany, Norway, and the United Kingdom met on the
Norwegian island of Utstein. These four Ministers decided to join forces
and intensify their cooperation on a number of issues and since that
meeting they have become known as “the Utstein Group.”
One of the issues the Utstein Ministers decided to tackle jointly was
the fight against corruption. The Netherlands Minister for Development
Cooperation, Eveline Herfkens, organized the Maastricht Anti-Corrup-
tion Conference in April 2000, which brought together representatives
from government, civil society, and regional and international multilat-
eral organizations in the bilateral donor community. The Utstein Group
endorsed the work of that conference through the Utstein Ministerial
Statement on Combating Corruption in Development devised in the
Hague, the Netherlands, 12 and 13 May 2000.
This book presents the background papers, the discussions, and the
recommendations from the Maastricht Conference and the Utsein
Group’s Statement.
xi
Preface
Eveline Herfkens, Minister, DevelopmentCooperation of the Netherlands
CORRUPTION HAS LONG BEEN A taboo topic. Both recipient countries and
donors were afraid to put it on the agenda. We may well wonder why,
since the use of public goods for private gain is so manifestly wrong, and
has such a serious impact on economic development. Corruption is
omnipresent, though the consequences are most devastating in develop-
ing countries. Corruption takes scarce goods away from the development
process and has a negative effect on investment and economic growth in
general. Moreover, corruption harms democracy, prevents the equal
distribution of services and creates insecurity.
The fight against corruption is not an isolated goal, but part of the
international drive to promote good governance and poverty reduction.
Corruption is a symptom of bad governance. It hurts us all and we
should all accept our responsibility. We cannot turn a blind eye to it.
Globalization and the increasing interdependence between states make
cooperation essential. The world must, therefore, join hands to elimi-
xii
nate the obstacles that prevent us reaching out to those in need.
Corruption is a major obstacle.
The World Bank set the anti-corruption debate in motion. Bilateral
donors have taken up the challenge and committed themselves to
concrete action. The Action Plan Against Corruption agreed by the
Utstein Partners (the United Kingdom, Norway, Germany and the
Netherlands) is a useful step. This action plan was drafted in the wake of
the Maastricht Conference in April 2000, which the Netherlands orga-
nized in cooperation with the World Bank Institute. The Utstein Partners
support the guidelines on good governance incorporated in the World
Bank’s Poverty Reduction Strategy Papers and the Comprehensive
Development Framework. At the heart of these guidelines is the joint
responsibility of governments, civil society and the private sector to
alleviate corruption. Again, we are all responsible and must, therefore,
commit ourselves to fighting corruption.
Taboos do not disappear overnight. However, corruption is now on
the international agenda and can no longer be ignored. This report,
produced in the wake of the Maastricht Conference, is part of the
growing international understanding that transparent and accountable
government can no longer remain a promise awaiting action. If we are all
part of the problem, we must all be part of the solution. I hope that the
knowledge and ideas contained in this volume will inspire us all to
concerted action.
Eveline Herfkens
Minister, Development Cooperation of the Netherlands
3
Opening Speech: Corruption Distorts Development Investments
Opening Speech:Corruption DistortsDevelopment Investments
Eveline Herfkens, Minister for DevelopmentCooperation, Ministry of Foreign Affairs,The Netherlands
THE FOLLOWING IS THE FULL text of the minister’s opening speech.
Example I: At a hospital in Tanzania, essential medical supplies
purchased with foreign currency disappear from the public dispensary
within hours. That evening they are available for purchase at a doctor’s
home. The poor do not receive the free medical care promised by the
government. Those with the right connections who are able to pay can
secure medicines in abundance.
Example II: An old man in Pakistan is left without income after his
son is murdered. In order to benefit from his son’s estate, he requires a
“succession certificate” from the civil court in the district capital. The cost
of the train journey and the bribe demanded by the clerk of the court
send him deeper into debt. After five separate trips to the court in as
many months, he has still not been given the stamped piece of paper to
which he is legally entitled.
Example III: A donor-country gives large amounts of money to a
government that has repeatedly declared its intention to introduce
4
Herfkens
reforms and to fight corruption. A large part of the money is intended
for a bridge to link isolated villagers during the rainy season and to
build schools so that girls can be educated. Local confectures are hired,
the project is directed by well-intended local professionals. Perfect, but
two years later when the donor goes to assess the results, the bridge
doesn’t exist. One school has been built but a local leader has made it
his own home.
When I looked at these examples for this prepared speech, I felt this
is not fair. These are only examples of officials being bribed in develop-
ing countries. So let me just add a few examples. Several times that I was
approached by developing countries’ governments that Dutch busi-
nesses were putting undue pressure on these governments to take
decisions that they felt were not the right decisions to take, and that
these businesses were threatening that if the government would not
accommodate, the aid volume would be affected. Well, these companies
have no way to influence that at all. We have had some recent scandals
in the Netherlands, at the local government levels, of officials, which
have made expense statements and got refunding. Well, these expense
statements were totally insufficiently founded. In my personal working
life, I had twice to take disciplinary measures against members of my
own team because they had indeed overstated their expense statements
and asked for refunding. Just a few among many examples of everyday
corruption and its everyday impact on people, in developing countries
of course especially the poor. Let us not make the mistake to think that
corruption is something typical for developing countries. Developed
countries also suffer from it enormously.
Corruption: it is difficult to pin it down, to define it. But we all
recognize it when we see it, or worse, feel its effects. Hard facts about
corruption are difficult to come by. Is it ten per cent? Twenty? Or much
more? We don’t know. But all investigators agree that corruption causes
massive economic and social harm. Money disappears into the wrong
pockets, the credibility of the authorities is undermined, investment
falls away or is misdirected, development grinds to a halt, and the
5
Opening Speech: Corruption Distorts Development Investments
poorest groups end up paying the price. No use pointing the finger and
blaming everyone else. Corruption occurs to varying degrees in every
country and region on earth. We are all part of the problem. We are
playing the game of corruption better every day. But none of us has yet
mastered the art of prevention.
It is a pleasure to see you all here for this conference, which marks a
new era in the anti-corruption effort. For if we are all part of the problem,
it is only jointly that we can form the solution. It is time for the donor
countries to find their comparative advantage in the battle against
corruption. The initiative for this conference derived from the Utstein
Partners, four female Ministers of Development Cooperation and
members of the World Bank Development Committee from the United
Kingdom, Germany, Norway, and the Netherlands. The Utstein Partners
are taking the lead and you have generously agreed to help us by develop-
ing a detailed and workable plan of action. Thank you. I will focus today
on four aspects of this fight:
• First, fighting corruption is not an isolated goal.
• Second, this effort is not a closed shop.
• Third, what does an active strategy mean in practice?
• Fourth, political commitment among the Organisation for
Economic Co-operation and Development (OECD) countries.
On the first point, fighting corruption is not an isolated goal.
Corruption is a symptom of bad governance, which in turn impedes
poverty reduction and sustainable development. For this reason, the fight
against corruption must be firmly incorporated into a coherent and
realistic development strategy. It needs to become an integral part of the
Poverty Reduction Strategy Papers and the emerging Comprehensive
Development Framework. Performance, not promises, should be the
focus whether the issue is education for girls or combating corruption.
When visiting developing countries I always say, “Financing the results,
not the intentions is the prime goal.” Micro management of aid money is
an illusion. Money is fungible. What matters is the overall effect of aid as
part of all resources available for development. In the end, the only
6
Herfkens
long-term and effective control mechanism against corruption in
developing countries as well as in developed countries is a strong civil
society with political opposition, an independent press, and service users
who claim their rights. It is civil society and the media that must clamor
for and demand anti-corruption performance, measurable results, a
better quality of life, especially for the most marginalized and disadvan-
taged, and, most particularly, women. Civil society and non-governmen-
tal organizations (NGOs) have an important role especially as
whistle-blowers and monitors.
This leads me to my second point. The Utstein partnership is an
open process, just the beginning of a much wider partnership. This
conference is an excellent start towards building a partnership process
that includes donor and recipient countries, as well as all stakeholders
from the various sectors of society. This also means working with the
business community and international financial institutions. If we are all
part of the problem, together we are also the solution. And that means a
relationship based on “Responsible Corporate Partnership” in which the
importance of the role of the private sector is seen not as a threat but as
an essential part of the solution. This partnership consists of analyzing
the problems and building more transparent and open ways of conduct-
ing transactions. Of course, the purpose of business is to earn a profit.
But this should be done in a way that takes account of the people in the
countries where the business is done or where the business affects the
quality of people’s lives. And in an environmentally responsible way.
Business controls money. It is powerful. With responsible corporate
partnership, we can make a positive powerful aggregate.
My third point, what does an active strategy mean in practice? The
Netherlands has a list of some twenty countries that it supports bilaterally.
They are selected on the two criteria of degree of poverty and good
governance. Yet, many of these countries find themselves at the negative
end of the Transparency International anti-corruption perception scale. It
is not so hard to guess the reasons why. Those poor developing countries
have many structural characteristics, which render them open to corrup-
7
Opening Speech: Corruption Distorts Development Investments
tion. For example weak institutions, low public-sector pay, dependency
on aid, a comparatively weak civil society, and low service delivery.
An active strategy means enabling countries to take the lead and
make reforms in a manner that is consistent with their way of life, but that
combines performance in financial, accounting and auditing sectors as
well as law enforcement and the judiciary to bring about a reduction in
corruption. It means supporting these countries in making institutional
reforms and building stronger institutions. But we need to see improved
performance. Governments need to demonstrate the necessary determi-
nation and political will to continue to rely on our aid.
Finally, my fourth point, political commitment among OECD
countries. I am sorry to say that the Netherlands will be one of the last
countries to ratify the OECD anti-corruption convention. Parliamentary
procedures are time consuming. But we will sign up. The convention is a
big step in the right direction. The senseless present distinction between
bribing Dutch officials and bribing foreign officials will disappear.
Current legislation is appalling. Bribes are tax deductible. Under the new
law, the payment of bribes will be an offense carrying a four-year prison
sentence. As Clare Short said in a speech last year, “The world’s growing
interdependence, the mobility of capital and the global flow of informa-
tion, means we need to bear down on corruption world wide. It is no
longer possible to live with one set of standards at home and another in
relation to foreign trade and investment.”
Sadly, legislation is still not tough enough on such abject practices as
money laundering. The likes of Mobutu, Marcos, and Suharto stashed
billions in secret bank accounts in OECD countries. We, therefore, need
to see how the OECD convention can be strengthened and which steps
we can take beyond the convention.
Another obligation on donors is, I think, structuring their aid in such
a way as to discourage corruption. Current practices encourage it. It is not
always easy for recipient countries to keep track of the different proce-
dural demands from the many donors. And where there is no transpar-
ency, corruption is easy. The Utstein countries have begun to harmonize
8
Herfkens
their aid procedures within certain sectors in a few countries. Some aid is
still tied. I hope this conference will pay sufficient attention to this issue.
Tied aid is corruption prone since it is not subject to transparent procure-
ment procedures. We need action at three levels—in the European Union
(EU), in the OECD and in the World Trade Organization (WTO).
My colleague of Economic Affairs and I have asked the European
Commissioner Frits Bolkestein to take steps at the EU level to combat this
practice. Attempts to untie aid within the OECD/Development Assistance
Committee (DAC) face stiff opposition from several member states. If no
consensus is reached within the DAC, like-minded countries could start
untying their aid reciprocally. Also, we need to broaden the WTO
government procurement agreement to encompass aid.
Let me conclude. We have already seen a very interesting debate on
the Internet over the last few weeks. One of the last contributions was
written by Mohammad Kisbubi from Uganda who said, “Donors should
make corruption one of their main concerns; not so much to find out
which country is most corrupt, but to work closely and support those
countries that have accepted the existence of the problem in their midst
and are committed to doing something about it. It is like the way we
handled the AIDS epidemic in Uganda. While other countries were busy
denying the existence of AIDS or arguing what percentage of their
population was infected, in Uganda we simply said we have a problem
and if we do nothing we stand to lose a whole generation. Similarly, we in
Uganda will welcome those willing to partner with us in this struggle
while leaving us the liberty to be in the driving seat and assist us as we
move on the road to a less corrupt, more transparent society based on
accountability and good governance.” I couldn’t agree more.
Your Excellencies, ladies and gentlemen, although we can never
eradicate corruption completely, we can make huge strides in eliminating
the type of corruption that distorts development investments and
diminishes the quality of life and hope for a better future for millions of
people. I look forward to receiving the plan of action that you will be
drafting in the coming days.
9
Opening Speech: The Role of Bilateral Donors in Fighting Corruption
Opening Speech:The Role of Bilateral Donorsin Fighting Corruption
Mats Karlsson, Vice President of External Affairs,World Bank
OVER THE PAST FOUR YEARS, the World Bank has been a prominent inter-
locutor in the growing global discourse on corruption. Thanks to Jim
Wolfensohn’s bold speeches, we have helped place the issue
front-and-center on the international agenda. It is difficult to remember
that until quite recently corruption was not an issue, which was talked
about freely. This is a remarkable development because the common
recognition of a problem is the first step toward finding solutions. And
indeed, we are discovering that as complex and profoundly systemic as
corruption can be, it is not an unreachable mystery beyond our control.
No. Real progress is underway. Through Bank research and support for
innovative programs, we are helping to identify where and how corruption
does the most damage, and what can be done to address the causes. We
have a better understanding of the effects of corruption on political and
economic life. We also have good ideas about the kind of regulatory and
administrative mechanisms that are required to reduce its reach and
influence. And we are tackling the problem head-on in more than 600
10
Karlsson
programs, in ninety-five countries in areas of civil service reform, judicial
and legal systems, tax administration, procurement, auditing, customs, and
many other areas. This is vital work and it must continue.
But I am not here today to talk about the World Bank or technical
aspects of institutional reform. Rather, I want to take this opportunity
to raise tough questions about the larger political and social dynamics
in the countries where we are together working to fight corruption.
These are complicated issues. And for many years they have been
difficult to discuss in fora such as this, particularly for the World Bank,
which as you know is mandated to base policy decisions exclusively on
economic considerations. This is an important and valuable restric-
tion—one, which has served its members, well for more than fifty-five
years. Importantly, however, the Bank’s development mandate has
gradually evolved, which has enabled the institution over time to
address issues not traditionally considered part of development
economics, but which, consistent with the restriction on interfering in
political affairs, have come to be recognized as central to its develop-
ment mandate. Corruption is one clear example.
From one perspective, it seems funny that strategies to build integrity
and accountability in governance should be a tricky issue for us to discuss
together. For it is absolutely fundamental that what are now known as
industrialized countries have waged their own battles against corruption
by sharing experiences, over generations, on those big political questions
which vex us to this day: What is the nature of public responsibility? How
big or small should optimally be? And how can we, as citizens, organized
through government, best achieve our collective ends?
This sharing of experiences remains as vital today as ever before. The
fight for accountable public administration, representative government,
and social equity is, of course, never over. But thanks to our commitment
to the exchange of experience and ideas, we have improved the art of
governance and the human condition in countless ways. This experience
can be no less true for Africa or Asia than for Europe.
11
Opening Speech: The Role of Bilateral Donors in Fighting Corruption
Our job, of course, is not to lecture developing countries on the
virtues of good governance, but to expand the dialogue on what works in
building public institutions that are accountable and transparent and
effective. We can be grateful that in the past few years we have moved
beyond the old debates about whether a strong government is good for
economic and social prosperity. As was stated clearly in the 1997 World
Development Report, “an effective state is vital for the provision of the
goods and services—and the rules and institutions—that allow markets
to flourish and people to lead healthier, happier lives.”
This message is driven home in work we have recently concluded
as part of a study called “Voices of the Poor.” Interviews with more
than 60,000 people in sixty poor countries reveal that poverty is
defined not just by low income, but illness, weakness, hunger and
perhaps most profoundly consistent, a sense of voicelessness. What is
absolutely striking is that the poor not only feel that their govern-
ment institutions do not represent their interests, but very often they
live in fear of the police and those in power. A young man from
Uzbekistan says, “The police have become the rich people’s stick used
against the common people.” And in Brazil, a poor person lamented,
“I do not know whom to trust, the police or the criminals. Our
public safety is ourselves. We work and hide indoors.” We heard very
clearly the links between corruption and insecurity. In Brazil, “You
grow up in an environment full of disease, violence and drugs…you
don’t have the right to education or work…you are forced to eat in
the hands of the government…so you are easy prey for the rulers.”
And finally in Bulgaria, “Corruption is virtually everywhere—that’s
how you place orders in the factory, that’s how you make sure your
child gets medical treatment.”
There are many issues, which contribute to and characterize under-
development in the world today—poor health and nutrition, illiteracy,
severe debt, bad economics, war and civil strife. But let us be clear. We will
never see lasting progress in the fight against poverty without fundamen-
12
Karlsson
tal improvement in governance. Reducing the destructive force of
corruption is perhaps the most important starting point.
One place to start is by democratizing the development process,
making sure that these voices of the poor are at the policymaking
table. We, as donors, can do much in this area. We can establish as part
of our relationship with governments regular consultations with local
civil society, including such groups as labor unions, elected institu-
tions, and rural and minority representatives. Indeed, our own
policies and lending or grant-making decisions must be informed by
this dialogue. At the Bank, we are trying to expand this kind of work
we have been doing for years through the Comprehensive Develop-
ment Framework and Poverty Reductions Strategy Papers, which are
to serve as clear, transparent reflections of broad, national dialogue on
policy decisions.
Reform of government decision making can be assisted externally,
but lasting change must be undertaken from within. But here, too, we
can lend support. Today I will focus on three areas of particular interest
to me and my colleagues at the World Bank. They are areas in which,
particularly through the activities of the World Bank Institute, we are
beginning important early work. They are subjects which not long ago
would have seemed far outside the ambit of development, let alone of
direct concern to the World Bank. But with research and experience, it
has become clear that they are issues, which must be addressed by the
entire international community.
The World Bank’s direct role in confronting challenges such as
these may be small, and in some cases, we may have no role at all. But
we absolutely must work together to bring all of our ideas and, where
appropriate, expertise and resources to bear to the problem. The tax
payer in industrialized countries, and more important the poor we
seek to help in developing countries, don’t care about mandates and
mission creeds. They care about us improving our effectiveness in
fighting poverty. To do that, we have to understand the full effect of
corruption.
13
Opening Speech: The Role of Bilateral Donors in Fighting Corruption
Parliament
Let me start with the legislative branch of government, which in many
poor countries is burdened in its ability to help fight corruption by
resource and constitutional burdens. But it is clear that Parliament has a
crucial role in fighting corruption, both as a law-making body and as a
bridge between the state and civil society. Over the past few years we have
met with hundreds of parliamentarians in many countries and a broad
mix of successful strategies is beginning to emerge. The role and relative
strength of parliamentary bodies differs between countries and political
systems. Legislatures perform vital policymaking functions. Through
oversight and budget authority, Parliament can
• hold governments accountable through the establishment of
legislative committees such as Public Accounts Committees;
• establish mechanisms to strengthen financial accountability, for
example in transparent budgeting and audit systems; and
• establish centers of authority, such as ombudsmen, auditors and
comptrollers general.
Parliaments also have the unique capacity to build political will to
combat corruption. This can be supported by
• ensuring personal integrity such as codes of conduct for parlia-
mentarians—disclosure of assets, conflict of interest;
• enacting legislation on campaign and political party finance;
• building transparency in wage levels and benefits;
• ensuring that parliamentary immunity is not abused;
• enacting legislation regarding the freedom of information; and
• protecting whistleblowers.
Finally, it is clear that sometimes it will be necessary to undergo
wholesale adjustments, such as rebalancing power between the executive
and the legislature, and in some cases between the state and civil society.
Media
Checks on government discretion must come from outside official circles
as well. For centuries, the open exchange of ideas and information has
14
Karlsson
been the cornerstone of freedom. As we move into the new century, it has
become the foundation not so much of economic dynamism, but
survival. We see all too often the brutal implications of breakdowns in the
simple communication of readily available information:
• Millions of children die each year from diarrhea, an easily prevent-
able and treatable sickness.
• Simple agricultural techniques could magnify crop yields in
starving countries.
• Basic financial information can make the difference in the success
or failure of rudimentary capital markets.
More than ever, commercial and social prosperity is built around the
emergence of an informed citizenry—an ever-expanding circle of people
who can demand improved policies and corruption-free institutions. A
recurring lesson from economies dealing with financial turbulence is that
full disclosure of financial information, good and bad, is fundamental for
stable economic growth. The media are the most dynamic guarantee of
this kind of information. As Jim Wolfensohn said in his speech to the
World Press Freedom Committee:
What could be more intrusive on politicians than a free press? What
is it that could enfranchise people more than a free press? What
became very clear to me…was that the issue of corruption and the
issue of press freedom, while they may have political impact, are in
fact essential issues in terms of economic development.
A vigorous, independent and professional press can play a critical
role in curbing corruption by raising public awareness about the costs of
corruption; and investigating and reporting incidences of corruption. In
too many places however, the press is hampered in its ability to play this
role by harassment of journalists such as death/torture/harassment;
official coercion, through charges of contempt, sedition, criminal
defamation; and concentrated ownership of newspapers.
15
Opening Speech: The Role of Bilateral Donors in Fighting Corruption
State Capture
Lastly, let me talk about a deeply troubling issue, one which we at the
Bank and I know many of you face in your work. The problem is a form
of corruption that is not readily fixable through administrative reform
and improved public sector management. It is a problem requiring a
comprehensive, long-term strategy.
A chronically weak state opens wide the doors to powerful non-state
actors to use their leverage and influence to shape the country’s legal and
regulatory framework to their own advantage. Often these actors will be
financial and industrial firms. The result will be the capture by powerful
elites not just of markets distorting the beneficial effects of competition,
private sector-led growth, but of the state itself. This presents a different
image of corruption, usually imagined as the bribe-taking customs officer
or tax collector. Rather, in this scenario, the extent of the damage done is
arguably greater, as the very rules of the game are permanently distorted
in favor of a powerful elite. Such far-reaching impact requires particular
attention by outside partners, whether they be private investors or we, as
donors, to ensure that the ground rules are transparent, and that objec-
tives can be achieved.
As I said, this last area is of great concern to the Bank. And while we
work to address its symptoms, beating the disease will take time and true
cooperation. I look forward to hearing more about the changing face of
corruption as this meeting goes on.
Conclusion
All of this raises many questions for donors. We owe thanks to work done
by my colleague Daniel Kaufmann, from whom you will hear this
afternoon, that there is a significant positive relationship between secure
civil liberties and the return on government development projects. We, of
course, also know that the corrosive effect of corruption on the
government’s capacity to build a sound economic environment has
fundamental implications for how scarce aid resources should be divided.
16
Karlsson
The calculus is stark. The Bank’s Assessing Aid report reveals that a $10
billion increase in assistance can lift twenty-five million people per year
out of poverty, if the money is channeled into countries with sound
management. By contrast, investments made without respect to basic
economic management criteria would lift only seven million people out
of poverty.
How do we measure our responsibilities faced with these numbers? Do
we abandon the seven million in favor of the eighteen million more who
will benefit from the aid? What can we do in the meanwhile? These are
the questions we are now facing. But we can never fully address these
questions unless we take on the big, tough, once-unspoken issues. I am
pleased to be here today. And I look forward to a good discussion on
these questions as we proceed together.
17
Improving Governance and Controlling Corruption
Improving Governance andControlling Corruption: NewEmpirical Frontiers and theCase for Collective Action1
Daniel Kaufmann and colleagues
The King shall protect trade routes from harassment by courtiers,
state officials, thieves and frontier guards…[and] frontier officers
shall make good what is lost… Just as it is impossible not to taste
honey or poison that one may find at the tip of one’s tongue, so it is
impossible for one dealing with government funds not to taste, at
least a little bit, of the King’s wealth.
—from The Arthashastra (by Kautilya, circa 300 B.C.)
THE ARTHASHASTRA WAS WRITTEN IN ancient India more than 2,000 years
ago. It is a detailed, far-sighted vision of a well-governed society that
weaves together socioeconomic, institutional, and political variables. In
contemporary development literature, there have been some essays on the
interplay of institutions with conventional economic variables. Some of
that attention has recently turned to corruption because of a growing
awareness of its dire consequences for good governance and democratic
18
Kaufmann
development. However, most contemporary economic development work
has underestimated the primacy of governance for development. Missing
too often is the recognition that corruption is a symptom of the state’s
fundamental weaknesses; all too often it is (erroneously) seen as an
uncontrollable single determinant of society’s ills. Also frequently absent
is the recognition that corruption is one among a number of very
important governance dimensions; others requiring as much attention
along with the complex interplay among all such factors. Such omissions
customarily lead to mistaken implications in practice and in strategies.
This paper does not attempt to present a comprehensive approach to
the study of corruption and governance. Instead, it captures selected
multidisciplinary elements, links them to the growth and development of
nations, and distills some insight for practical frameworks to improve
governance. Such an approach, however, is an emerging field where new
lessons of success and failure continue to materialize. Consequently, many
questions remain unanswered. This paper should be considered as one
input in our quest to glean lessons and insight from an ongoing discus-
sion of the kind of initiatives that may work in a particular setting, rather
than as a proposal for definitive answers.
Various aspects of governance are discussed in this paper, emphasiz-
ing the need to broaden the framework of analysis beyond the narrow
focus of corruption issues. Additionally, it summarizes some of the ill
effects of misgovernance and fraud on development, empirically ad-
dresses mechanisms linking governance to development, and examines
some concrete implications for policy and action to improve governance
and facilitate effective capacity building.
Governance Matters for Development
Worldwide evidence shows that a capable state with good and transparent
government institutions produces positive results in terms of income
growth, national wealth, and social achievements.2 Higher incomes,
investment growth, and longer life expectancy are found in countries with
19
Improving Governance and Controlling Corruption
effective, honest, and meritocratic government institutions. These are
streamlined institutions with clear regulations, where the rule of law is
enforced fairly and protects the citizenry and property, and where civil
society and the media have an independent voice. International and
historical experiences also demonstrate that capable and clean govern-
ment does not require that a country is initially fully modernized and
wealthy. The experiences of industrializing countries such as Chile, Costa
Rica, Slovenia, Estonia and Poland, as well as twenty years of evidence
from Hong Kong, Singapore and Spain illustrate this lesson.
To understand why many states have misguided policies and fail to
provide adequate public goods, the study of governance is essential. Often
entrenched vested interests and weak administrative capacity have
distorted economic policymaking and outcomes. It is important to
understand that a political process determines public policies and
expenditures. Increasingly, experience demonstrates that good outcomes
depend on accountable government, community participation, and a
strong voice for people and enterprises.
Defining Corruption and Governance
Corruption is commonly defined as the abuse of public office for private gain.
By contrast, governance is a much broader concept, and thus, more difficult
to define. At the risk of oversimplification, in this paper governance is defined
as the exercise of authority through formal and informal traditions and
institutions for the common good. Governance encompasses the process of
selecting, monitoring, and replacing governments. It includes the capacity to
formulate and implement sound policies, and the respect of citizens and the
state for the institutions that govern economic and social interactions.
From this definition, governance can be divided into three broad
categories, each containing two components:
1. (a) Voice and accountability includes civil and political liberties
and freedom of the press, and (b) political stability and lack of
violence.
20
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2. (a) Government effectiveness includes the quality of policymaking
and public service delivery, and (b) the lack of regulatory burden.
3. (a) The rule of law includes protection of property rights and an
independent judiciary, and (b) control of corruption. 3
Governance is, thus, a much broader notion than corruption. It affects
welfare and the quality of life through complex direct and indirect channels
in ways we do not fully understand. An improvement in one component
such as civil liberties can directly enhance the quality of life even if all other
socioeconomic factors remain constant. Governance can be a direct input
into growth. At the same time, equally important indirect effects are also at
play. For example, misgovernance can hurt the accumulation, distribution,
and quality of human capital (such as in education and health) or increase
the rate of depletion of natural resources.
Empirical Study of Governance
Recent empirical studies suggest the importance of institutions and
governance for development outcomes. One of the studies that conducted
cross-national tests using various indicators of institutional quality found
that the institutional environment for economic activity determines, in
large part, the ability of emerging economies to reach industrialized
country standards (Knack and Keefer, 1997).
The definition of governance, as presented previously, is broad
enough that a variety of cross-country indicators might shed light on its
various aspects. Applying this broad definition, hundreds of cross-
country indicators were analyzed as proxies for various aspects of
governance. These indicators came from a variety of organizations,
including commercial risk rating agencies, multilateral organizations,
think tanks, and other non-governmental organizations (NGOs). They
are based on surveys of experts, firms, and citizens and cover a wide range
of topics: perceptions of political stability and the business climate, views
on the efficacy of providing public services, opinions on respect for the
rule of law, perceptions of corruption.
21
Improving Governance and Controlling Corruption
Skeptical reactions naturally arise regarding the wealth of data on
governance. Are the data informative? What can business analysts on Wall
Street possibly know about corruption in Azerbaijan, Cameroon,
Moldova, Myanmar, or Niger? Are the data coherent? Do reported ratings
by enterprises about political pressures on civil servants and their waiting
times for customs clearances illustrate anything about the government’s
effectiveness in general, or do they measure something totally different?
Are the data comparable? Can a score of 3 out of 4 in transitional
economies compare with a score of 7 out of 10 in Asian countries? In
addition to meeting these criteria, can the data be useful for rigorous
econometric analysis of corruption or to advise policymakers?
These questions motivate the empirical strategy for measuring
governance in our framework. The data are mapped to the six sub-
components of governance and expressed in common units. The data are
informative, within measurable limits. But the estimates are imprecise
and require care in their use and presentation for policy advice. These six
distinct aggregate governance indicators are then developed (as per the
above classification), imposing some structure on available variables and
improving the reliability of analyses.
For illustration, consider the measurement issues for one of the
composite governance components: the rule of law. In Figure 1, the
vertical bars depict the rather large country-specific margins of error, or
statistical confidence intervals, for the estimated levels or point estimates
of governance. The interval reflects the disagreement among the original
sources about the level of governance and the rule of law. The horizontal
quartile limit lines dividing the countries into four groups are further
explained in the note to Figure 1 below.
The differences among more than 160 countries are quite large.
Countries are ordered along the horizontal axis according to their
ranking, while the vertical axis reports the estimates of governance for
each country. The margins of error, depicted by the thin lines, can be
considerable. Thus, it is misleading to have countries “run” in seemingly
22
Kaufmann
precise worldwide “horse races” to ascertain their ranking on various
governance indicators. Instead, an approach that groups countries into
three broad categories similar to a so-called traffic light approach for the
various separate governance dimensions is more appropriate and
statistically warranted:
• red light: governance crisis; countries in the bottom category
• yellow light: governance vulnerability or at risk
• green light: nations with better governance and not at risk
Following such a traffic light classification of the three categories,
identification is possible for a group of thirty or forty countries where
there is an urgent need to focus on better and cleaner government. Given
Figure 1. Aggregate Governance Indicators,
An illustration: Rule of Law Indicator
23
Improving Governance and Controlling Corruption
the margins of error, it is not very relevant to ascertain whether a particu-
lar country would rank number 125 or number 130 among the more than
160 countries for which there are governance data. However, it is relevant
that the country is in the red light or emergency governance zone, and
thus, it would benefit from its leadership and citizenry focusing particu-
larly on improving governance. Such in-depth review of the data suggests
that a large number of countries in the CIS, Africa and some in Latin
America and Asia are in the poor government performance category,
warranting urgent and sustained attention towards implementing a
strategy to improve governance.
Causal Effects of Governance
One value of these somewhat imprecise indicators is that they allow
systematic assessment of the benefits of good governance in a large
sample of countries. Good governance is strongly correlated with various
development outcomes across countries. However, it is possible to go
much further than merely pointing to an obvious correlation in the data,
which might simply reflect the fact that richer countries can afford the
luxury of good governance, as some of the practitioners of the worst
governance in the world often argue. Indeed, it is more useful to disen-
tangle the causal effect of improved governance on development out-
comes while overcoming the imprecision in existing governance data.
This analysis suggests a large direct causal effect from better gover-
nance to better development outcomes. Consider an (one-standard-
deviation) improvement in the rule of law from the low levels in Russia
today to the middling levels in the Czech Republic, or a similar decline in
corruption from that in Indonesia to that in Korea. Such would increase
per capita income two to four times, reduce infant mortality by a similar
magnitude, and improve literacy by 15–25 percent. And note that the
differences in governance for these two pairs of countries are not very
large. Much larger improvements in government effectiveness from the
levels observed in Paraguay (well in the bottom quartile) to that in Chile
24
Kaufmann
(well in the top quartile) would nearly double the development impacts
just mentioned.
These impacts are illustrated (Figure 2) for four development
outcomes and four measures of governance. The heights of the vertical
bars show the difference in development outcomes in countries with
weak, average, and strong governance, illustrating the strong correlation
between good outcomes and good governance. The solid lines illustrate
the estimated causal impacts of governance on development outcomes—
the “development dividend” of improved governance.
Composite indicators of governance, based on existing sources of
data, are powerful in drawing attention to governance issues. They are
also indispensable for cross-country research into the causes and conse-
quences of misgovernance. But they provide only a first benchmark of
Figure 2. The Development Dividend of
Good Governance
25
Improving Governance and Controlling Corruption
where countries stand relative to each other on governance issues. They
are a blunt tool for informed action to improve governance. To move to a
more concrete stage of specificity and usefulness within a country, one
needs to know much more about the country-specific policy and
institutional failures reflected in perceptions of misgovernance. To
construct useful action-oriented programming that improves governance,
program developers need in-depth diagnostic tools (see specific section
on diagnostics below for details). Against the above background, the
remainder of the paper develops the following questions: How does
corruption undermine governance and development? What is its
underlying cause? What kind of diagnostic tools and approaches can best
serve a country working to create honest, clean government?
Corruption and Development
Impact on Growth and Investment
The pernicious effect of corruption on development has been shown in
many studies. Mauro demonstrated that corruption slows the growth rate
of countries (1996). He found that if Bangladesh reduced its level of
corruption to Singapore’s, its average annual per capita GDP growth rate
from 1960–85 would have been 1.8 percentage points higher, a potential
gain of 50 percent in per capita income by 1985 (assuming growth of 4
percent per year).
What are the many channels for corruption to weaken economic
growth? From many different studies, we synthesize the main economic
costs of corruption in this brief list:
• misallocation of talent including under utilization of key segments
of society
• less domestic and foreign investment
• distorted enterprise development and growth of the unofficial
economy
• distorted public expenditures and public investments, and
deteriorated physical infrastructure
26
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• lower public revenues and lower prevalence of the rule of law as a
public good
• overly centralized government
Unfair and Disproportional Impact on the Poor
Where corruption prevails, the poor receive fewer social services, such as
health and education. It reduces total revenues available for social spending,
distorts the allocation of public expenditures, and denies the poor equal
access to public goods. Corruption also impairs the means to escape
poverty by undermining property rights and creating a regressive bribery
tax on small entrepreneurs. Corrupt regimes bias investment against
projects that aid the poor. For example, they often prefer defense contracts
to rural health clinics and schools. Further, abuse increases income
inequality and poverty through lower growth, less effective social program
targeting, unequal access to education, reduced social spending, and higher
investment risks for the poor. Governance affects poverty through a variety
of complex mechanisms, which are still partly misunderstood (see Table 1).
In-depth country analyses using the new governance diagnostic tools
(see below) illustrate how corruption is, in effect, a regressive tax. In
Ecuador and Latvia, poor households have to spend three times more in
bribes, as a share of their income, than higher income households for
access to public services. For example, Bolivian bureaucrats in agencies
rife with corruption discriminate against the poor in terms of access to
basic services.
Impact On Business
Bribery, sand versus grease? A common argument in academic literature
is that bribes to circumvent bad government controls can act like de facto
deregulation and, thus, have positive effects. This view may hold concep-
tually only in a very narrow sense if bad regulations are fixed indepen-
dently of public officials’ decisions. In reality, officials often have enor-
mous discretion in customizing the type and amount of harassment of
individual firms. Tax inspectors can inflate taxable income. Fire inspec-
27
Improving Governance and Controlling Corruption
tors can decide how many times to check a firm for safety “violations.”
Data on more than 6,000 firms in seventy-five countries show that firms
that pay relatively more administrative bribes eventually waste more, not
less, in higher costs for investments and in time spent with bureaucrats.
These administrative bribes are ultimately a disadvantage to the business
community and to society as a whole.
Corporate Responsibility and Governance
Grand Corruption and Unbundling the Measurement of Corruption
Generally, misgovernance hobbles enterprise development. Smaller firms
tend to bear the brunt of the bribery tax, as evidenced by a recent analysis
ytrevopfosesuacetamixorP esuacetamixorpstceffanoitpurrocwoH
htworgrewoL eudseiciloplanoitutitsni/cimonocednuosnU•stseretnidetsevot
erutidnepxecilbupfonoitacolladetrotsiD•latipacnamuhwolfonoitalumuccA•
sthgirytreporpdnawalfoelurfoecnesbA•rotcesetavirpotselcatsboecnanrevoG•
tnempoleved
nierahsllamsevahrooPhtworg
dnaseicilopetatserutpacetiletnemnrevoG•noitacollaecruoser
sruenerpertnellamsnoxatyrebirbevissergeR•roopehtdna
dnaserutidnepxecilbupnissenevissergeR•stnemtsevni
noitubirtsidemocnilauqenU•
cilbupotsseccaderiapmIsecivres
cisabfoytilauqdnasseccasriapmiyrebirB•ecitsujdna,noitacude,htlaehrofsecivres
roopehtotylralucitrap—erehpslacitiloperutpacsetilE•
noitacudednahtlaeH namuhfonoitalumuccastceffaylevitageN•.cte,ycaretil,ytilatromtnafnignidulcnilatipac
Table 1. A Synthesis Matrix: Corruption and Poverty
28
Kaufmann
of about 3,000 enterprises in transition economies conducted jointly by
the World Bank and the EBRD in mid-1999 (the ‘BEEPS’ survey). Indeed,
it is found that smaller firms would be prepared to pay significantly more
than their larger counterparts in taxes if their bribes could be reduced,
suggesting their larger burden.
This research also provides insights into the link between political
influence, corruption, and enterprise performance. This is done by
‘unbundling’ the measurement of corruption. The survey attempted to go
beyond measuring the conventional or petty forms of corruption, and,
thus, data on grand corruption were measured. In a number of transition
countries, the survey finds that a minority of influential firms that
purchased parliamentary laws, presidential decrees and/or undue influence
at the Central Bank, and also inflicted a large indirect cost on the develop-
ment of the rest of the enterprise sector. It was discovered that in what
might be called high capture states, individual captor firms that purchase
legislation do gain short-term benefits in the form of increased sales (and
thus may see it in their interest to continue such practices). In contrast, the
costs to society are extremely high. As state capture illustrates, there are
some types of bribery (related to grand corruption) that have a particu-
larly pernicious cost on welfare. It skews the pattern of capital accumula-
tion towards the firms buying influence, distorting employment patterns,
and slowing growth.4
The evidence from this survey also underscores the high prevalence
and cost of another grand form of corruption, namely kickbacks for
public procurement. A very large number of firms (including foreign
multinationals) engage in this practice in order to secure public sector
contracts, and the percentage ‘fee cut’ paid for corrupt contracts is rather
significant as well. This practice is also very costly in overall social terms.
More broadly, the survey results indicate the investment climate
remains poor where these practices prevail. Firms in the CIS, such as
Russia and Ukraine, are still reporting serious weaknesses in the invest-
ment climate. Problems with taxes and regulations are consistently
29
Improving Governance and Controlling Corruption
identified as extremely serious obstacles to business by most firms in
transition economies. Even as the elite corporate sector in a number of
transition countries could play a more active role to improve corporate
responsibility, so arbitrary state regulation, unpredictability of govern-
ment policies, and a weak legal system provide a breeding ground for
corruption and undermine governance at the national level. Hence, the
imperatives of state reform as well as improved practices from the
corporate sector. 5
Throughout the region, the survey shows that the greater the extent
of grand corruption, the weaker the investment climate (investing fewer
resources in public goods like infrastructure, regulatory institutions, and
law and order), the lesser the protection of property rights and security of
contracts, and the more business management wastes time in negotia-
tions with public officials. Reflecting the cost of corruption, more than 50
per cent of the Russian and Ukrainian firms surveyed said they were
willing to pay more taxes if the government could reduce levels of
corruption and crime.
The Responsibility of Foreign Investors
An important finding from the BEEPS survey is the extent to which firms
with foreign direct investment (FDI) also tend to use bribery as part of
their corporate strategy, for instance, in order to secure public contracts.
The extent of bribery by firms with FDI in most categories is no lower
than for fully domestically financed firms.6
If we look at developments across the transition economies as a
whole, instead of despair, the results from many countries suggest real
hope. High corruption is neither endemic to the process of transition,
nor an inherent historical or cultural trait of the region. The business
environment survey shows tremendous variation across transition
economies in the extent of corruption and the quality of governance.
There is much to learn from the positive experiences of this decade.
Estonia and Poland are illustrations of these experiences where promo-
30
Kaufmann
tion of new private sector development, strengthening the capacity of
the state, and enhancing the accountability of government all have
played key roles in improving governance and limiting corruption.
Causes of Corruption
Empirical studies on the causes of corruption are relatively new, and the
empirical link from corruption to development is yet to be fully under-
stood. But evidence is emerging to suggest that some determinants of
corruption are important. This evidence supports the notion that
corruption is a symptom of deeper institutional weaknesses.
Absence of Political Rights, Civil Liberties, and the Rule of Law
Political rights (democratic elections, a legislature, opposition parties)
and civil liberties (free and independent media, freedom of assembly and
speech) are negatively correlated with corruption. Figures 3 and 4 show
how more civil liberties and freedom of the press correlate with less
Figure 3: Civil Liberties and Bribery
31
Improving Governance and Controlling Corruption
corruption. Increasing evidence points to the importance of empowering
civil society in addressing corruption and that inclusion of women
(whether measured in parliamentary representation, social rights, etc.)
does help. Devolution from the center to the localities, such as fiscal
decentralization, also matters. Similarly, the evidence points to a signifi-
cant association between the rule of law (protection of property rights,
independent judiciary, judicial resolution of conflict) and corruption. But
the direction of causality is ambiguous because many aspects of the rule
of law are endogenous to corruption.
Role of Civil Liberties and Free Press in Controlling Corruption
PUBLIC WATCHDOG INSTITUTIONS. Public watchdog institutions alone
are not always the solution. The overall success record of such public
watchdog bodies is mixed at best, with the notable exception of the
Hong Kong Independent Commission Against Corruption. Even in
Hong Kong, where the ICAC has been effective, the fact that other
Figure 4: Press Freedom and Control of Corruption
32
Kaufmann
broader reforms took place simultaneously has been under-empha-
sized. And in other settings the necessary political independence and
ability to work collegially with the citizenry by such public agency was
often missing. Even where a watchdog may have a rationale, it is
critical that it is part of a much broader program of institutional
reforms and civil society involvement.
PUBLIC FINANCE AND REGULATION. Empirical studies also show that
corruption is higher where there is:
• a high degree of state ownership in the economy;
• excessive business regulation and taxes;
• arbitrary application of regulations;
• high black market exchange rate premiums and trade restrictions,
protectionist and anti-competition measures;
• ineffective regulation in the financial sector and in budgetary
processes; and
• a monopolistic economy.
CIVIL SERVICE. Civil service professionalism—including training,
hiring, and promotion systems—also appear to be associated with less
corruption. Contrary to conventional wisdom, the evidence on civil
service pay is ambiguous. Better public sector salaries on their own may
not explain a significant reduction in corruption. In agencies with better
pay (in Ecuador, for example), there is no lower incidence of corruption.
Indeed, in many settings the most damaging corruption is committed by
powerful politicians and government officials. Meritocracy in hiring,
promotion and firing within an agency is associated with less corruption,
as is transparency and absence of arbitrary discretion. These contrasting
results (on salaries vs. meritocracy, transparency and lack of arbitrariness
in one in-depth study, agency by agency, in a Latin American country)
show the need to conduct in-depth empirical diagnostics in a country
intent on formulating a serious anti-corruption program.7
33
Improving Governance and Controlling Corruption
A Multi-Faceted Strategy to Improve Governance
A number of things are known as to what is needed to improve gover-
nance and reduce corruption—an independent judiciary, the rule of law,
good institutional and public sector management, the institutional
oversight and involvement of civil society, deregulation and tax and
budgetary reform, and financial and procurement reforms (Figure 5).
There is much less certainty about how to put them together for the most
impact. What types of changes are feasible under what political condi-
tions—and how should reforms be sequenced?
Political Economy• Political will• Vested interests Economic Policy
• Deregulation• Tax simplification• Budget reform
Financial Controls• Measuring procurement costs• Procurement reform• Audit/financial management• Financial regulation• Corporate governance
Public Oversight and Civil Society• Civil society/media participation• “Power of data”/empirical surveys• Independent agency/NGO• Parliament oversight
Legal-Judicial• Independence/restructuring• Meritocratic judicial appointments• ADR mechanisms/alternatives
Institutional Reform• Customs• Transparent privatization• Government reform
GoodGovernanceCivil Service
• Pay• Restructuring• Meritocracy
Figure 5: Multi-pronged Strategies for
Improving Governance, Good Government,
and Combating Corruption
34
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Towards a Multipronged Strategy 8
Given what is known about the main determinants of corruption, what
kind of programs towards better governance may have an impact? The
emerging lessons suggest that reducing corruption and improving
governance requires a system of checks and balances in society that
restrain arbitrary action by politicians and bureaucrats and foster the rule
of law. Institutional arrangements that diffuse power and promote
accountability and transparency are key to a system of checks and
balances. Furthermore, the recent work on state capture highlights the
need to place checks and balances on the elite corporate sector through
promoting a competitive market economy. Another salient feature of a
strategy is a meritocratic and service-oriented public administration.
PROMOTING COMPETITION AND ENTRY. In many transition and develop-
ing countries, one source of grand corruption comes from the concentra-
tion of economic power in monopolies that then wield political influence
on the government for private benefits. The problem is particularly acute
in natural resource-rich economies, where monopolies in oil, gas and
aluminum for instance, wield considerable economic and political power
that leads to different forms of corruption—nonpayment of taxes,
nontransparent offshore accounts, purchasing licenses and permits,
purchasing votes and decrees that restrict entry and competition.
TOWARDS A SOCIAL CONTRACT: FACILITATING CIVIL SOCIETY OVERSIGHT
AND PARTICIPATION. Civil society oversight and participation in the
decision-making and functioning of the public sector have been a
crucial counterweight and instrument to combating corruption and
improving governance. This involves making the state transparent to
the public and empowering the citizenry to play an active role. Coun-
tries such as Sweden, Norway, Denmark, and Finland have been in the
forefront in transparency reforms. But public-sector culture in many
transition and developing countries fosters secrecy of decision-making.
35
Improving Governance and Controlling Corruption
In much of the CIS, for example, parliamentary votes are not publicly
disclosed, public access to government information is not assured, and
judicial decisions are typically not available to the public. Moreover,
despite a growing civil society, governments typically do not involve
NGOs in the monitoring of decisionmaking processes or performance.
Concentrated media ownership and recent restrictions on news
reporting have weakened the ability of the media to ensure accountabil-
ity of the public sector.
Changing to a transparent culture involves a fundamental change in
the way decisions in the public sector are taken. The types of transparency
reforms that have been effective internationally include:
• ensuring public access to government information (freedom of
information);
• opening certain government meetings for public observation;
• conducting public hearings and referenda on draft decrees,
regulations, and laws;
• publishing judicial decisions;
• strengthening the system of administrative appeals (a process to
adjudicate wrongful state decisions);
• ensuring freedom of the press by prohibiting censorship, discour-
aging public officials’ use of libel and defamation laws to intimi-
date journalists, and encouraging diversity of media ownership;
• inviting civil society to monitor its performance, especially the
implementation of politically difficult reforms such as anticorrup-
tion and key public procurements.
Civil society’s role ought to be seen as dynamic and providing an
opportunity to political leaders intent on building the credibility of the
state, by recognizing its potential in coalition-building and collective
action. For instance, new activities in many countries where the World
Bank is working, in collaboration with donor agencies and local institu-
tions, involve supporting the collective team work of civil society, the
media, experts, the private sector, the reformists in the executive and
36
Kaufmann
legislative in formulating governance and anti-corruption reform
programs. The process of positive involvement by the key stakeholders in
civil society creates a momentum towards ownership and sustainability of
the reforms, and builds credibility (as has occurred in some countries in
Eastern Europe and in Latin America).
ENSURING ACCOUNTABILITY OF THE POLITICAL LEADERSHIP. Closely related
to the above, the political leadership needs to demonstrate its commit-
ment to fighting corruption by public disclosure and transparency of its
own financing, income and assets. In several advanced market economies
and democracies in the OECD, this has entailed
• requiring public disclosure of votes in parliament;
• reviewing desirability of parliamentary immunity;
• requiring public disclosure of sources and amounts of political
party finance;
• requiring public disclosure of incomes and assets of senior public
officials and their key dependents;
• preventing conflicts of interest for public officials;
• protecting the personal and employment security of public
officials who reveal abuse of public office by other officials in their
organizations (whistleblower statutes).
BUILDING A MERITOCRATIC AND SERVICE-ORIENTED PUBLIC ADMINISTRA-
TION. Cross-country evidence conclusively shows that recruiting and
promoting on merit (as opposed to political patronage or ideological
affiliation) is positively associated with both government effectiveness
and control of corruption. While achieving change will take time,
effective reforms in this area have included: creating independent,
professional institutions with checks and balances and introducing a
comprehensive performance management system, with pay and promo-
tion linked to performance. (In Malaysia and Thailand, this led to
increased recruitment and retention of managerial and professional staff,
37
Improving Governance and Controlling Corruption
and to increased effectiveness in civil service performance.) Pay levels for
managerial and key professional staff need to be broadly competitive with
the private sector, and often allowances and non-cash benefits need to be
simplified, monetized and made transparent.
Experience shows that exposing public administrations to pressures
and demands from their clients, both from the private sector and from
citizens, has a major impact on improving service delivery and public
administration effectiveness. Reform measures in this area could include
setting and publishing service standards; assessing Ministry/agency
performance against these standards through in-depth diagnostics
(including of public officials), of client surveys, and publishing the
results; setting up a wide range of user groups and consultative bodies;
and developing Internet-based approaches to delivering services. These
measures proved extremely effective in generating demands from
customers and an increased service orientation in the United States, the
United Kingdom, and Malaysia.
ENSURING TRANSPARENCY AND ACCOUNTABILITY IN PUBLIC EXPENDITURE
MANAGEMENT. Basic systems of accountability in the allocation and use of
public expenditures constitute a fundamental pillar for a good and clean
government. Accountability in public expenditure management requires
the following: (1) a comprehensive budget and a consultative budget
process; (2) transparency in the use of public expenditures; (3) competi-
tive public procurement; and, (4) an independent external audit.
Many countries face problems of budgetary transparency, where a
large proportion of expenditure remains off budget, major areas of
budget expenditure do not pass through the Treasury system, and there is
substantial recourse to extrabudgetary funds and a lack of any effective
system of controlling expenditure commitments, leading to persistent
accumulation of budgetary arrears. Several countries in transition have
made progress in addressing these problems with comprehensive
Treasury reform programs, such as Latvia and Hungary. Further, the
38
Kaufmann
budget must first have comprehensive coverage of Government’s activi-
ties. Second, disclosure matters: many developed countries publish
frameworks for public expenditure strategy.
TRANSPARENT AND COMPETITIVE PUBLIC PROCUREMENT. Corruption in
public procurement is pervasive in transition and developing econo-
mies. Reducing corruption requires adhering to strict discipline in
terms of transparent and competitive bidding of major contracts,
maximizing the scope of public oversight and scrutiny. In order to
make the process of government procurement more efficient and curb
corruption, three Latin American countries (Mexico, Chile and
Argentina) have recently adopted electronic government acquisition
systems. All procurement notices and their results are placed on a
publicly available website. There are other important innovations
taking place as well, relating to activist external monitoring. NGOs are
increasingly playing a role in spearheading public audiences for
setting out the rules of the game for large scale procurement projects
(such as in Argentina and Slovakia) and throughout the transparent
bidding process itself (including Transparency International’s integ-
rity pledges). The World Bank has also taken a very active role in
aggressively pursuing firms engaged in misprocurement in projects. In
fact, publicly delisted firms engaged in corrupt procurement are
available on the Bank’s website.
ESTABLISHING INDEPENDENT EXTERNAL AUDIT. Several Eastern European
countries have established Supreme Audit Institutions (SAIs) which are
genuinely independent, with constructive impact on public financial
management systems (Czech Republic, Poland) In the Czech republic,
audit reports are not only published and presented to the legislature, but
the report is discussed in Cabinet along with a proposed plan for correc-
tive actions, in the presence of the SAI and relevant ministers. This is in
sharp contrast to many African countries, where the SAIs are not
39
Improving Governance and Controlling Corruption
independent and where both they and the legislatures lack the capacity to
exercise effective oversight.
SUBNATIONAL GOVERNANCE: WORKING FROM THE BOTTOM UP 9 —PARTICI-
PATORY COALITION-BUILDING FOR MUNICIPAL REFORMS. In many countries, the
central government is reluctant to engage in anti-corruption reform
because of the political risk. One way some countries have tried to reduce
this risk is by piloting governance reforms at the local level. In a pilot
municipality in Venezuela, for example, substantial reductions in corrup-
tion and poverty and an increase in business activity were achieved within
Box 1: Promoting Rule of Law: Alternative Mechanisms Needed?
The rule of law, according to the New Palgrave Dictionary of Economics and the
Law, is defined by opposing it to the rule of powerful men or women. This helps
in understanding the challenge in many countries, where powerful politicians or
leaders often influence the practical operation of judiciary, legal enforcement
institutions, police, and other official legal bodies. As we observed in Figure 1
above, there is enormous variation around the world (and across and within
regions) in the quality and application of rule of law from the public sector.
Despite their training and education, many judges and other personnel are
prone to capture by politicians and corrupt interests. In such contexts, the legal
institutions are an integral part of the governance problem—and not a part of
the solution. This reduces the relevance of conventional advice on improving
governance through creation of institutions such as an ethics office, passing yet
another string of anti-corruption laws, providing technical assistance in the form
of computers or other hardware, or sending sitting judges on study tours and to
conferences. Instead, innovative approaches and alternative mechanisms to
improve governance are more effective such as alternative dispute resolution
mechanisms; more systematic NGO involvement in monitoring and the develop-
ment of alternative institutional arrangements; and exploiting more fully the
power of empirics and informatics within and outside the public sector.
40
Kaufmann
a short two-year period. This record has sparked interest in various
countries replicating this pilot on a wider scale.
Large countries facing daunting governance challenges like Russia
and Ukraine are attractive candidates to selectively explore and advise on
further reforms at the subnational/municipal level. Competition for
investment has provided an incentive for some regions and cities to
undertake radical transparency reforms, and for others to begin trying to
replicate their successes. While this process has emerged spontaneously
(for example, in Obninsk, a small city outside of Moscow, and some
settings in Latin America), it is slow and can benefit from information
and incentives provided by the Federal Government. At the subnational
level there is also much untapped potential to form coalitions between
local government and civil society for improving governance. The
demonstration effect of grassroot participatory programs that spearhead
transparency reforms in coalition with reformist city managers could be
dramatic, in Russia and beyond.
Diagnostic Tools
The collection, analysis, and dissemination of country-specific data on
corruption are altering the policy dialogue on corruption and empower-
ing civil society through collective action.
Yet important challenges remain regarding further progress with
the survey diagnostic instruments. One is to continue to refine the
method for transforming survey evidence into reform priorities by
attaining the appropriate balance between in-depth governance survey
data analysis, complementary information from other sources, and the
participatory coalition-building work of civil society, the executive and
the private sector. Strategies to complement in-depth empirical diag-
nostic surveys include focus group discussions of governance diagnos-
tics and assessments of a country’s readiness to reform—assessments
that look at the impact on key stakeholders of reforming particular
policies and institutions.
41
Improving Governance and Controlling Corruption
Box 2: Governance and Survey Diagnostic Tools*
The first set of governance and corruption diagnostic surveys was conducted
in Albania, Georgia, and Latvia. (More recently, surveys have been carried out
in other countries, enabling cross-country comparisons and correlations, thus
significantly expanding our understanding of corruption and its causes.)
These surveys ask various key stakeholders (citizens [service delivery users],
enterprises, and public officials) detailed questions about the costs and private
returns of misgovernance and corruption. Confounding skeptics who claim
that parties to corruption would systematically underreport it, these studies
demonstrate that respondents are willing to discuss agency-specific corrup-
tion with remarkable candor, while firms also volunteer detailed information
about bribery and misgovernance.
Of particular relevance to policy formulation is the variation across
countries in the types of corruption: in Georgia, the most common form of
corruption was embezzlement of public funds while in Albania, it was theft of
state property. Bribery in procurement was common in all, as were other types
of corruption. Weakness in the judiciary was identified as one of the primary
causes of corruption in Albania, while regulatory failures were relatively more
serious in Georgia and Latvia. Moreover, a significant share of petty bribes in all
three countries was paid to officials to avoid taxes, customs duties, and other
liabilities to the state. In Albania and Georgia, lost fiscal revenues were substan-
tial, as tax payments and other liabilities due the state were crowded out by
petty bribes.
When the data from the surveys were presented in workshops to members
of the business community and civil society, the policy debate abruptly changed
from vague, unsubstantiated, and personal accusations to a focused discussion
on systemic weaknesses substantiated with empirical evidence, thus promoting
more targeted and country-specific reforms.
* This box and much of the section on survey diagnostics is an abridged version of PREMNote 7, “New frontiers for diagnosing and combating corruption,” October 1998. Foradditional results of these in-depth diagnostics, refer to new diagnostics in Latin Americaand Asia. For the full version of this Note, and the Step-by-step Guide to implementationof Governance and Anti-Corruption Survey Diagnostics, see in http://www.worldbank.org/wbi/governance/.
42
Kaufmann
A second challenge is to develop a more effective strategy for
implementing the reform agenda. Once survey data are in hand, the
government must begin the more difficult task of introducing reforms to
root out the sources of corruption. A natural temptation is to simply ask
for the resignation of the senior officials who manage the most corrupt
agencies. But corruption is too pervasive and systemic to disappear with a
few individuals.
A third challenge is to sustain the reform effort with broad-based
participation involving all government branches, civil society, and the
business community (see Box 2). The government may then be able to
promise reform by allowing private competition alongside public
provision of some services (for example, private forms of alternative
dispute resolution to compete with the judiciary). Data collection needs
to be institutionalized, so that statistics on agency-specific corruption can
be tabulated annually. Broad dissemination of the statistics can further
empower stakeholders to use this information to continue the reform.
The next frontier is to further deepen the design of agency-specific
surveys and other empirical tools to complement existing methods and
deepen agency-specific reforms. Through new survey instruments we are
collecting detailed information on behavior in even the most dysfunc-
tional government agencies and in the delivery of specific services.
Further, hard procurement price comparisons can complement this
information. Used with other empirical devices, such diagnostic surveys
can focus the political dialogue on concrete areas for reform and rally civil
society behind reform efforts. Finally, the new surveys increasingly
attempt to measure grander forms of corruption, for example state
capture through the purchase of legislation. Equally important, such
measurement is increasingly cardinal, i.e. in numerical scales, moving it
further away from the less precise subjective and ordinal indicators of
conventional polls of the past. An illustration of this effort of measuring
(‘cardinally’) grand corruption is in the BEEPS survey for transition
economies mentioned above.
43
Improving Governance and Controlling Corruption
This type of self-diagnostic data—used by a variety of in-country
stakeholders and disseminated through participatory workshops—has
mobilized broader support for consensus-building and collective action
for institutional reforms. Albania’s national governance workshop took
place at the same time as the semifinals of soccer’s World Cup in France.
The workshop was presided by the head of government, with the cabinet
and hundreds of civil society stakeholders participating. It featured the
presentation of the main findings of the in-depth diagnostic results, a
debate on the priorities for action, and a concluding commitment by the
Box 3: “Voice” As a Mechanism to Enforce Transparency
and Accountability
Client and citizen surveys that incorporate feedback from citizens have helped to
improve public sector performance in many countries. Generating data and
disseminating it widely can be a potent instrument to mobilize civil society and
apply pressure on political structures. Simple comparative charts illustrating
findings on corruption helps mobilize and give voice to previously silent and
disparate citizenry groups. The scorecard invented by Sam Paul in Bangalore,
India embodies this approach, entailing periodic citizen evaluations of local
public services and of bribery and extortion. It has led to improved service
delivery. Similar initiatives have taken place in Campo Elias, Venezuela, and
Ternopyl, Ukraine.
In the past, citizens in Mendoza, Argentina, have participated in drafting
transparent rules governing public procurement, and more recently similar
reforms have been taking place in Buenos Aires. A number of localities through-
out the world have embraced similar participatory process, notably the city of
Porto Alegre, Brazil. As part of its pioneering system of participatory budgeting,
the city holds assemblies that discuss expenditure priorities for education, health,
public transit development, taxation, city organization, and urban development.
They then elect members to a citywide participatory budgeting council, which in
turn decides the city’s investment plan.
44
Kaufmann
leadership to a pro-governance program. The next day, the front pages of
all newspapers in Tirana featured charts showing the results of gover-
nance diagnostics, with detailed reporting inside. The World Cup soccer
results were relegated to back pages. Today, Albania is carrying out a
serious anti-corruption program, featuring judicial and customs reform,
with support from the World Bank.
Bolivia, Georgia, and Latvia have also progressed from diagnostics to
concrete action. In Bolivia civil service and procurement reforms are
being emphasized. In Latvia tax, regulatory and custom reforms are
priorities. In Georgia, following the abysmal results for the judiciary in
the diagnostic surveys, President Sheveranadze decided that all judges had
to be re-tested—on television! Two thirds of the judges failed the exam
and have been replaced.
In other countries, similar efforts are taking place at the municipal
level, as in Ukraine, where surveys and specific actions are being elabo-
rated for several cities. Pioneered in Bangalore, India, a report card allows
citizens to evaluate the quality of local government services. And in
Campo Elias, Venezuela—thanks to the leadership of the mayor, a
courageous woman who believes in the power of governance data to
inform and mobilize for action—the reported incidence of corruption
has been halved.
So, data are powerful in mobilizing support for reforms, but the vested
interests resisting them are powerful as well. That is why political leadership,
civil society, the competitive enterprise sector, and the donor community
need to build on the insights and momentum generated by the diagnostics,
move from diagnostics to action, and make progress on the ground.
Conclusion
Misgovernance and corruption can yield to knowledge—and an in-
formed citizenry. Indeed, a key pillar is empowering civil society with
more rigorous and reliable information. Transparency is important in this
context. Research shows that the greater the participation of private
agents in ownership and management, the better the service performance.
45
Improving Governance and Controlling Corruption
Empirical research with the thousands of World Bank-financed projects
also shows that participation and civil liberties are vital for improved
performance of government projects in emerging markets. The obvious
challenge is finding the means of doing so. When this is possible however,
numerous experiences have demonstrated that listening to the voice of
stakeholders can have a considerable impact.
Governance needs to be understood in a broader context than merely
fighting corruption. Misgovernance distorts policymaking and
misallocates human and physical resources, in turn slowing income
growth and increasing poverty. The many failed capacity-building
approaches and investments in the past did not pay enough attention to
fostering good governance, to controlling corruption, or to the under-
standing of the political economy of institution building. Governance
needs to enter center stage in institution-building strategies, and within
them, develop an understanding of the particular vested interests by
different influential groups. Further, focus is needed on recognizing that
incentives, prevention and systemic change issues within institutions
plays at least as important a role as traditional legal or individualized
enforcement initiatives.
Governance and participation will be key for an improved approach
to technical assistance and capacity building in the future. In turn,
improving governance ought to be seen as a process integrating three vital
components, which can be encapsulated in a simple formula, IG & AC =
KI + LE + CA, meaning that Improving Governance and Anti-Corrup-
tion can be addressed by a combination of
• Knowledge (with rigorous Information, data and empirical
analysis, including in-depth, in-country governance diagnostics
and the ability to effectively utilize worldwide data);
• Leadership, (the example of effective political leadership with
integrity), and
• Collective Action (via systematic participatory and consensus-
building approaches with key stakeholders in society, leading to a
social contract of sorts).
46
Kaufmann
The evidence also points to the need for an integrated, more compre-
hensive approach to improve the effectiveness and integrity of govern-
ment and to provide a climate for successful development. Economic
institutions, such as the budget and the nature of public investment
programs are as important as sound macroeconomic policy measures, as
are the civil liberties and participation with which they interact. That
underpins the case for a more comprehensive (à la CDF) approach,
interlinking economic, institutional, legal, and participatory variables.
Within this context, it is important to emphasize also the role of the
corporate sector, both domestically and internationally. As reported
through new survey results, corporate responsibility (or lack thereof) can
have an important impact on diverse strategies by the corporate sector
(including FDI) in either improving or undermining national-level
governance. The corporate sector, abroad and domestically, has an active
role to play in any social compact with civil society, the executive and the
legislature within a country so as to improve overall governance. At the
same time, with the importance of decentralization, initiatives at the sub-
national level are becoming increasingly relevant, and thus municipal-
level initiatives need to be emphasized—where feasible, integrated into
national level programs.
Participation and voice are vital in increasing transparency, providing
for the necessary checks and balances, and diminishing state capture by
the elite’s vested interests. It is not enough to aim at getting basic eco-
nomic policies right ‘in paper’ without recognizing the political economy
forces at play. For an enhanced focus on attaining sustained growth and
modernization through institution building, a concerted approach
integrating rigorous empirical understanding of the governance chal-
lenges within a country, with participation by all key stakeholders—
possibly within a context of a ‘social contract’—championed by the
country’s leadership is likely to bear fruit.
47
Improving Governance and Controlling Corruption
Notes
1. The work of various sections in this paper draws on a number of
collaborative projects at the World Bank that include the author and,
notably, Phyllis Dininio, Maria Gonzalez de Asis, Aart Kraay, Sanjay
Pradhan, Randi Ryterman, and Pablo Zoido-Lobatón. In addition,
Joel Hellman and Geraint Jones at EBRD, and Luis Moreno Ocampo
of Transparency International-Latin America have made significant
contributions. Special credit is also due to the Governance Group at
the World Bank Institute and the collaborative programs with
regional colleagues at the World Bank, institutes and experts in the
emerging countries we are working on and collaborating with, and
partner donor agencies in our work on governance and anti-corrup-
tion programs. This work also draws from a chapter in the forthcom-
ing book The Quality of Growth. The data presented originates from
various enterprise surveys (as well as outside expert rating agencies)
and are subject to a margin of error. The purpose is not to offer
precise comparative rankings across countries, but instead to
empirically illustrate characteristics of governmental and corporate
performance in order to assist in drawing implications for action.
Views, errors, and omissions are the responsibility of the author, and
the views expressed here may not necessarily reflect those of the
institution or its executive directors. For suggestions/further details,
contact author at [email protected] or http://
www.worldbank.org/wbi/governance.
2. See World Development Report 1997.
3. For details see Kaufmann, Kraay and Zoido (KKZ) 1999a and b,
“Aggregating Governance Indicators,” and “Governance Matters,”
(respectively), Policy Research Papers 2195 and 2196, The World
Bank, (http://www.worldbank.org/wbi/governance).
4. For more information see J. Hellman, G. Jones, and D. Kaufmann
“Seize the State, Seize the Day: An Empirical Analysis of State Capture
and Corruption in Transition,” Paper presented at the World Bank’s 12th
48
Kaufmann
ABCDE 2000 Conference, April 2000 (http://www.worldbank.org/wbi/
governance ).
5. For an in-depth discussion see J. Hellman, G. Jones, D. Kaufmann, and
M. Shankerman “Measuring Governance, Corruption, and State
Capture: How Firms and Bureaucrats Shape the Business Environment
in Transition Economies,” Policy Research Working Paper 2312, The
World Bank, April 2000 (http://www.worldbank.org/wbi/governance ).
6. Thus, the progress on ratification of OECD anti-bribery legislation,
at least thus far, does not seem to be a significant deterrent to foreign
direct investment. This points to the importance of focusing on
transnational bribery as well, and transcending the mere passage of
new laws by focusing not only on the enforcement of such laws but
also on complementary measures.
7. Other factors in the empirical work on causes of corruption appear to
be important as well. As expected, income per capita and education,
when other factors are constant, are correlated with lower rates of
corruption. There are exceptions, however. It may be that general
developmental variables are mere proxies for more specific determi-
nants of corruption such as the quality of public sector institutions or
the rule of law. See Ades and Di Tella for a very useful review. Most of
the new studies synthesize the results of cross-country research and
are indicative rather than definitive. Additionally, there is the serious
challenge of corruption being endogenous and important country-
and regional-specific factors. For instance, evidence suggests that
administrative bribery is more prevalent than judicial malfeasance in
former socialist economies. This is a reflection of bloated bureaucra-
cies in many of these countries and of over regulation and weak
judiciaries. In Latin America, by contrast, there has been considerable
economic and regulatory reform, but less judiciary reform.
8. I owe much of this section to the partnership, specific inputs, and
collaborative work with Sanjay Pradhan, Randi Ryterman, and the
ECA team at the World Bank.
49
Improving Governance and Controlling Corruption
9. For further details (and acknowledgement of their inputs), see
writings and inputs by Maria Gonzalez de Asis, Sanjay Pradhan,
Randy Ryterman and Shang-Jin Wei on these issues.
55
Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
Procedures and Guidelines ofDonor Agencies to Preventand Suppress Corruption
Sahr Kpundeh
CORRUPTION IS INNATELY A COMPLEX phenomenon. It is neither defined nor
explained by dishonest individuals and the consequences of their behavior.
It is an intricately woven set of circumstances that occur as a result of the
actions of domestic as well as international actors within the political,
economic, and social sectors of a country. Consequently, collaboration and
coordination among the members of the international development
community are increasingly crucial to an effective campaign to reduce
corruption. A solid commitment from the government, the private sector,
and civil society along with institutional changes are required to develop
and enact concrete solutions—solutions that include both preventive as
well as punitive measures, which address accountability, transparency, and
system inequities, politically and economically. As a catalyst to ensure
sustainable reform, now more than in any other endeavor, international
development should focus on integrity in governance.
This paper reviews the procedures and guidelines of multilateral
agencies such as the World Bank and the United Nations Development
56
Kpundeh
Programme (UNDP), and some country directives such as the Swedish
International Development Agency (Sida) directives and the Norwegian
Agency for Development (NORAD) approaches designed to reduce
corruption in the projects they support. This paper will use the World
Bank’s approach as a template to provide a context for discussing other
policies as it is an example of a comprehensive organizational approach to
reform. It is designed not only to prevent corruption in Bank supported
projects, but more important, it establishes an exhaustive set of preventive
guidelines against corruption.
However, the Bank’s mandate does not extend to the political aspects
of controlling corruption. Its general counsel drew attention to this
limitation in 1997 saying, “The only legal barrier in this respect is that the
Bank and its staff must be concerned only with the economic causes and
effects and should refrain from intervening in the country’s political
affairs.” And although it is clearly recognized that engaging civil society is
crucial for controlling corruption in the long run, there are also limits on
the Bank’s ability to directly support civil society’s efforts.
The Bank has four fundamental aspects to its new strategy. They are
(1) mainstreaming anti-corruption activities; (2) preventing abuse in
bank-financed projects; (3) helping bank-supported countries to combat
corruption; and (4) lending voice to international efforts.
Mainstreaming Anti-Corruption Activities
The World Bank’s Approach
According to published World Bank documents, Bank staff has begun
more explicitly to consider corruption in its economic work, including
processes such as country strategy formulation, lending, economic and
sector work, research, and country dialogue. A key thrust of
mainstreaming has been to address governance and corruption explic-
itly in the Country Assistance Strategy (CAS). The CAS provides the
framework for reform programs and is the fundamental vehicle to
articulate concerns about abuse in Bank supported operations. In 1997,
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
management required that every CAS contain a diagnosis of each
country’s governance conditions and an assessment of project risks. As
a result, corruption and governance have increasingly become part of
the dialogue between Bank and country officials. To guide bank
management, they consider the following factors in their lending and
disbursement decisions:
1. the likelihood of corruption in Bank projects during or following
their design and implementation;
2. the extent to which development objectives are compromised;
3. government’s willingness to control corruption if it threatens the
effectiveness of Bank projects and/or economic and social
development.
According to published Bank documents, mainstreaming also
emphasizes building internal capacity through training, research, and
analyses—the development of new diagnostic tools and knowledge
management. The training programs for operational staff range from
orientation courses on the Bank’s anti-corruption strategy to brown bags
and seminars that routinely invite external experts to discuss a multiplic-
ity of reform elements. These training programs promote awareness and
generate discussion among Bank staff, exposing them to the latest
policies, procedures, knowledge, and resources. Additionally, various
units within the Bank conduct corruption-related research to contribute
to the global knowledge and resource pool.
The United Nations Development Programme
According to Fighting Corruption to Improve Governance, a UNDP
policy document, UNDP’s approach to corruption is much broader than
strategies used by the World Bank and other donor agencies primarily
because their support is not conditional. Its approach is to build trust and
confidence by working with governments to identify and pursue appro-
priate policies through open and participatory dialogue with other
stakeholders. Unlike the World Bank, UNDP focuses less on building its
internal capacity to deal with corruption, either through staff training
58
Kpundeh
and/or research. It focuses more on creating an enabling environment for
sustainable change by fostering an open and effective relationship
between the state, the private sector, and civil society. This includes
creating partnerships and building coalitions to fight corruption. They
also help national institutions strengthen transparency and accountabil-
ity, and assist in mobilizing resources for programs to improve institu-
tional integrity.
Swedish International Development Agency
According to Sida’s Directives to Promote Good Administrative Practice
and Counter Corruption, this agency approaches reform by developing a
country strategy similar to the Bank’s CAS. For example, prior to project
acceptance, Sida’s management conducts studies in at-risk country
sectors. These data are used as a basis for Sida’s strategy development,
which includes in-depth discussions about potential areas of society
where Swedish support can maximize its contribution. However, like the
UNDP, there is little emphasis on building internal capacity to deal with
corruption and/or promote awareness among staff.
Norwegian Agency for Development
NORAD’s Anti-Corruption Action Plan 2000-2001 indicates that the
fight against corruption is prominent on the agendas with partner
countries. According to this document, the agency has linked it with other
good governance issues, such as democracy, respect for human rights, and
public sector reform. They conduct training to raise staff awareness about
corruption and good governance.
Preventing Corruption in Projects
The Bank’s Approach
According to published documents, the Bank will ensure that its projects
“set an example of best practice” by strengthening its procurement and
disbursement procedures. This includes greater emphasis on borrower
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
accountability and government financial management systems. Bank
management examines capacity, skills, and standards in both the private
and public sectors and offers recommendations to strengthen capacity in
these areas. Additionally, the Bank has tightened its oversight of the
borrower’s procurement processes, and as part of this move, the Bank
now periodically launches in-depth surprise procurement audits of
selected projects to identify weaknesses in the procurement supervision
system. Internationally recognized independent firms conduct these
audits. Failure to adhere to Bank procedure results in various penalties
including revocation of the contract.
According to available Bank documents, new procedures have been
established for debarring contractors from future Bank-financed con-
tracts. If contractors have committed fraud or corruption in the procure-
ment or execution of Bank-financed contracts, the Sanctions Committee,
appointed by the President, reviews the investigations and debars firms
from bidding on Bank-financed projects. According to published Bank
documents, independent firms hired by the Bank have audited a total of
fifty-four projects. The audits have revealed a number of deficiencies
ranging from a departure from agreed procedures and lack of proper
documentation to institutional weaknesses. Consequently, the Bank has
declared misprocurement on about forty contracts with a total value of
$40 million. A total of 45,000 contracts are financed by the Bank annually
totaling roughly US$45–50 billion. Additionally, it has instituted mea-
sures to keep its own house in order. For example, two major changes in
1998 strengthened existing efforts, the hotline and the Oversight Com-
mittee on Fraud and Corruption.
Hotline: A telephone hotline to report all allegations of fraud and
corruption provides a central focal point within the World Bank
Group. It accepts and investigates complaints of abuse recounted by
Bank staff and the public both within the United States as well as
internationally. The hotline operates 24 hours per day, seven days a
week. It is operated by an independent firm staffed by multilingual,
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Kpundeh
trained specialists, who work within the guidelines of strict universal
standards of confidentiality. Investigations that involve staff members
are conducted in full compliance with staff regulations.
Oversight Committee on Fraud and Corruption: This group has the
mandate to review all allegations, of fraud, or abuse that involve
Bank Group-financed contracts. In other words, the new Oversight
Committee on Fraud and Corruption is responsible for supervising
all investigations into allegations of fraud, including those that
concern World Bank Group staff. This committee also ensures these
investigations are conducted promptly and responsibly and is
charged to protect the confidentiality of investigations by establish-
ing procedures that prohibit the improper use of information
obtained during discovery.
The United Nations Development Programme
UNDP policy, according to published documents, requires that govern-
ments, stakeholders, and beneficiaries participate in the design and
implementation of governance reform programs. By assisting countries in
developing national capacities to articulate goals, policies and strategies,
UNDP aims to elicit broad national support and consensus for their good
governance programs. They also review administrative systems to ensure
adherence to anti-corruption rules and procedures.
The UNDP, similar to the World Bank, has internal mechanisms to
combat corruption in its operations. The Office of Audit and Perfor-
mance Review (OAPR) evaluates the application of internal control
measures and provides oversight against internal abuse. According to
published documents, UNDP has instituted an array of management
systems and procedures to deter and prevent corruption. However, it is
not clear whether the organization has a stipulated policy on sanctions in
case of corruption.
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
Swedish International Development Agency
Sida’s administrative directives indicate that its primary method to
prevent malfeasance is to improve the administrative, financial, and
management capacity of the recipient countries. This technique allows
Sida to utilize the logical framework approach (LFA) in project selection.
It provides for a thorough and realistic examination not only of those
project components that are crucial to implementation but also explores
potential risks. Project administration is more intensely scrutinized and
all proposals are systematically inspected to ensure compliance with
current directives. The LFA aims to prevent fraud and abuse by requiring
that support is contingent upon the partner country’s ability to meet
specific criteria. These criteria are determined through: a) examination of
the partner’s general administrative and accounting capacity; b) inspec-
tion of the project budget, including whether it is reasonable, and
sufficiently detailed for follow-up and control; c) a review of procurement
regulations; and d) examination of agreements that stipulate how Sida’s
control requirements are satisfied through periodic audits and reports.
Sida’s administrative directives also highlight the organizations’
internal controls, which are monitored by the Division for Planning and
Control. The division supplies the instruments that secure transparent
and efficient financial management of Sida’s operations and resources;
and allows independent staff to conduct internal audits.
Norwegian Agency for Development
According to NORAD’s Anti-Corruption Action Plan 2000-2001, the
agency’s general commitment to transparency implies that it continues to
work toward improved clarity in organizations. It outlines agency policy,
which dictates all grants to governments, non-governmental organizations
(NGOs), and others are accessible not only to the contracting parties but
also to journalists and the general public. NORAD’s grants are published
on its Internet home page and all Norwegian Embassy home pages.
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Furthermore, the action plan requires the revision of standard
agreements and contracts to incorporate penalty clauses when they are
breached due to corruption. Those penalties may include termination or
repayment of illegally obtained funds. The action plan recommends
augmenting preventive measures with tighter, highly visible monitoring
of programs from their inception and endorses a revision of its ex-post
control procedures as they allow donors to discover mismanagement only
after it has occurred. It also provides better tender procedures, more
qualified tender boards, and measures to control procurement and other
corruption-prone areas as well as the application of more conventional
control methods such as using an independent third party as the signa-
tory to all major disbursements. However, unlike the World Bank,
NORAD does not have concrete policies that help the agency prevent
fraud and corruption in its own projects such as the Bank’s hotline and
oversight committees, which provide opportunities for staff and outsiders
to report corruption in Bank projects.
Country Assistance
According to published information on the Bank’s web page
(www.worldbank.org/publicsector/anticorrupt/htm), it has a tradition of
supporting public sector reforms to improve the efficient, effective, and
transparent management of public resources. For example, the Bank
addresses various aspects of policy and institutional reform that are
probably critical in reducing corruption. These aspects comprise a multi-
pronged approach to combating abuse, which include: economic policy
and its implementation; institutional reforms and a framework for civil
service employment; the legal-judicial system; financial control mecha-
nisms; and the extent and nature of public oversight. Credible commit-
ment by political authorities to the anti-corruption agenda is an impor-
tant factor in obtaining the Bank’s assistance in fighting corruption.
In addition to providing loans, grants, and expertise for economic
policy reform and institutional strengthening, the Bank can supply special
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
assistance to aid anti-corruption measures. These include:
• help in the design of governments’ anti-corruption programs;
• conducting surveys that diagnose the extent and character of
corruption in a given country;
• disseminating the results of these surveys; and
• facilitating and providing workshops and training for government
officials and members of civil society.
One limitation the Bank recognizes is that much of their emphasis has
been on measures to improve financial management solely in Bank
projects. Unfortunately, this approach does not necessarily create a capacity
for better financial management outside the confines of the project.
The United Nations Development Programme
According to UNDP policy documents, its priorities include support for
institutional development and reform in its overall goal of creating an
enabling environment through good governance interventions. UNDP
staff assists in constructing a framework for institutional change that
fosters a relationship between state and civil society. Such a focus on
institutional strengthening, it is hoped, may help countries understand
corruption as a failure of governance with corrosive political and eco-
nomic effects.
UNDP policy documents highlight numerous measures that have
been established to design programs that effect change. Such programs
address institutional and policy reforms; methods for reducing the
motivation and opportunities for bribery and administrative regulation;
plans to increase transparency through improved financial management;
and opportunities to create a responsible, independent media. Like the
World Bank, UNDP staff conducts studies and supports workshops that
build and strengthen national capacities to develop and implement
comprehensive anti-corruption reform strategies. As pointed out earlier,
UNDP tends to focus less on training governments than it does on
training members of civil society.
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Swedish International Development Agency
According to Sida’s directives, their development guidelines are centered
on the idea that a cooperative partner has a decisive influence and
responsibility for Swedish support. Sida’s country assistance ranges from
allowing partner countries to “own” the activity and construct develop-
ment work, to jointly conducting administrative system surveys. Conclu-
sions from these joint studies serve as the bases of program endorsement.
Sida’s guidelines carefully avoid allowing its oversight authority to control
an activity, essentially creating a passive rather than an engaged coopera-
tive partner. When countering corruption, the guidelines instruct the
agency that it is particularly important to hold the cooperative partner
accountable for the project idea and planning as this provides the best
indication of the country’s ability to implement the project.
Sida integrates its inter-governmental support with the government’s
budget and its reform activities with the partner country’s administrative
systems. The agency’s main rule for public sector grants is that the
financial support is included in the central government budget, and
eventually channeled to the activity via the budget for the country’s
ministry of finance. Agency executives maintain this integration grants
the country’s public sector audit the obligation to oversee and examine
how the funds are used. If financial administrative capacity is discovered
yet controls are inadequate, so-called by-pass solutions are utilized, where
funds are transferred to a third party to ensure they are used as intended.
Norwegian Agency for Development
NORAD’s anti-corruption action plan for 2000-2001 suggests that reform
assistance should not be limited to policy dialogue and subsidizing anti-
corruption initiatives. NORAD should promote practices that minimize the
scope of abuse and facilitate its cooperative development strategy. Briefly,
the plan includes, among other things, the following recommendations:
• First, NORAD should offer assistance to partner countries to
prepare a comprehensive anti-corruption strategy.
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
• Second, the agency should provide assistance to reduce corruption
in public administration. Possible areas for support could be
service delivery surveys; information/awareness raising campaigns;
strengthening institutions such as the ombudsman function; and
specific public sector reforms.
• Third, NORAD should assist partner countries in raising the risks
and costs of being caught for corrupt actions. Most partner
countries need comprehensive external assistance to strengthen the
rule of law. Among the priority areas are police investigative
training in economic (white collar) crime; modernizing the
judicial system; and improving internal controls to curb corrup-
tion within the police force and judiciary.
• Fourth, NORAD should establish mechanisms for systematic
collection, analysis, and dissemination of priority partner coun-
tries’ experiences to prevent and combat malfeasance. Systematiz-
ing these experiences can aid others in the implementation of
comprehensive anti-corruption programs.
• Finally, the action plan recommends that the agency review the
state of corruption and governance in all twelve priority partner
countries along with a few others, identified as pivotal partner
countries with the purpose of
– assessing the extent and forms of corruption in government, the
private sector, and civil society;
– assessing political will and government efforts to combat abuse;
– identifying key players and potential partners;
– identifying areas, institutions, and organizations eligible for
support;
– identifying “danger zones” in the existing development coopera-
tion program to provide intense monitoring; and
– identifying areas, sectors and programs in the continuing
cooperative development approach in which it is feasible to
integrate anti-corruption measures.
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International Support
International organizations provide a forum to agree on common
definitions and standards, and to coordinate actions. The Bank supports
international efforts to control corruption including the Organisation for
Economic Co-operation and Development (OECD) initiative to
criminalize transnational bribery and eliminate the tax deductibility of
bribes, and the related endeavors of both public and private sector
organizations. According to published documents, the World Bank’s
approach has been to support international efforts by
• helping to coordinate both cross-border and in-country anti-
corruption efforts;
• focusing the Bank’s efforts on areas of its comparative advantage;
• forming strategic collaborations with other organizations;
• gathering and disseminating knowledge about corruption
internationally; and
• developing and explaining Bank policy.
In addition to supporting the OECD initiative and disseminating
information about the convention and its implications to borrower
countries, the Bank also participates in a number of international reform
efforts. For example, it collaborates closely with other Multilateral
Development Banks (MDB) in the MDB Working Group on Governance,
Corruption, and Capacity Building.
The United Nations Development Programme
According to UNDP policy document “Fighting Corruption to Improve
Governance,” the Management Development and Governance Division
(MDGD) spearheads UNDP reform policies through its specific
program on accountability and transparency (also known as PACT).
PACT aims to build and strengthen capacities to improve accountability
and transparency in the financial, political, and administrative spheres,
thereby creating an enabling environment for good governance.
According to a recent evaluation of the program, PACT is recognized on
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
a global level as an excellent program leader in the field of financial
accountability for public expenditure, and has compiled an impressive
network in this field. UNDP, like all international organizations,
supports collective action in promoting good governance at the global
level by collaborating with organizations such as the World Bank,
Transparency International and other donors in co-sponsoring various
conferences where best practices are shared. The most recent example is
its support of the 9th International Anti-Corruption Conference in
Durban, South Africa.
Swedish International Development Agency
In its desire to support low-income countries’ efforts to combat poverty,
Sida’s directives require collaboration with other donors to promote good
administrative practices. For example, in trying to understand the forms
of corruption in a country prior to project selection, Sida requests
information and advice from other donors, mass media studies, and
information from a variety of other contacts.
Norwegian Agency for Development
According to its action plan, NORAD is committed to actively partici-
pating in international forums, where activists share their reform
experiences. The aim is to transform NORAD into an international base
for relevant knowledge and experience on how to prevent and curb
corruption. It recommends NORAD cooperate with other organiza-
tions and institutions such as the World Bank, the United Nations, and
Transparency International, leaders in systematizing experiences of
global level corruption. NORAD has attached considerable importance
to mechanisms that monitor the implementation of the recently
adopted OECD convention, Combating Bribery of Foreign Public
Officials in International Business Transactions. The same applies to the
World Trade Organization’s efforts to enhance transparency in the
public procurement process.
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Concluding Thoughts: Questions for Donors to Consider
It is clear from the descriptions above there are differences as well as
similarities in approach and emphasis between the multilateral and
bilateral agencies. One obvious question is what are the implications of
these differences for recipient countries in terms of mixed messages and
conflicts among donors? For purposes of discussions, a few issues to
consider are outlined below.
Blacklisting
The World Bank currently has a list of firms that are ineligible for World
Bank-financed contracts because of deficiencies ranging from departure
from agreed procedures and lack of proper documentation to basic
institutional weaknesses. Should bilateral and other donors adopt a
similar system?
Hotline
Several donors have explicit directives against corruption especially in
projects they support. However, sometimes their policies are unclear or
are not user friendly. Should donors introduce a similar system like the
World Bank’s hotline to increase openness and provide recipient
countries’ citizens with specific procedures to report corruption within
their projects?
Access to Information
Should donors consider encouraging governments to allow more
transparency by making important financial information available on the
Internet? For example, governments can publicize their budgets and
accounts and other relevant information on development and even the
laws relating to finance, regulations, and anti-corruption. Should donors
start this effort by designing joint web pages, which list recipients of loans
and grants, and the programs these funds support? One example of an
ongoing effort in this area is a collaborative project proposed by Trans-
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Procedures and Guidelines of Donor Agencies to Prevent and Suppress Corruption
parency International, OECD, and the Asian Development Bank. This
group wants to establish an Asian website, which tracks donors’ regional
anti-corruption programs, and collects and disseminates Asia-specific
data on corruption via the Internet. Should this idea be replicated in
other regions?
Financial Management
The Bank’s emphasis has been on measures to improve financial manage-
ment in its projects, which does not necessarily create a capacity for better
financial management outside the confines of the project. Adjustment
lending or program support requires action by the developing country
government to improve and strengthen its financial and procurement
systems. Is this an important issue that requires donors to collectively
support and take a firm and/or uniform position?
Increase Donor Support for NGOs?
Should donors consider providing support to NGOs or Community
Based Organizations (CBOs) that work with practical initiatives to fight
corruption, especially at the municipal level, in addition to the support
they provide organizations that work with policy instruments? For
example, the USAID-funded Americas’ Accountability and Anti-
Corruption (AAA) Project (www.respondanet.com) coordinates the
Donor Consultative Group (DCG) on Accountability and Anti-
Corruption in Latin America and the Caribbean. The DCG is presently
composed of six bilateral and twelve international donors and uses the
bilingual (Spanish/English) newsletter Accountability as its communi-
cation vehicle. In 1999, AAA implemented Anti-Corruption Without
Borders/Anti-Corruption Sin Fronteras for LAC/NGOs. ACWB/ACSF
promotes the use of Internet resources and a regional network of anti-
corruption NGOs to strengthen the capacity of these organizations and
enhance their reform contributions. Should such efforts be replicated in
other regions?
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More Support for Collective Action?
Given the mutual suspicion that exists between governments, anti-
corruption agencies and civil society, it is unclear whether reform groups
genuinely attempt to involve civil society and the private sector. Coalition
building between civil society and the government continues to be one of
the foci in future strategies. Should donors target programs that promote
collective action among various stakeholders for additional support?
Nurturing Political Will?
The presence of political will is a critical starting point for sustainable and
effective anti-corruption strategies and programs. However, its presence
cannot always be assumed in reform efforts. Should donors consider
providing support to nurture political will in recipient countries given the
constraints in some of their mandates?
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How to Prevent Corruption in Development Aid-Funded Projects and Programs
How to Prevent Corruption inDevelopment Aid-FundedProjects and Programs
Per Øyvind Bastøe and Mette Masst
TWO TRENDS HAVE BEEN VISIBLE in the development community during the
last decade. First, a growing concern about corruption and poor
governance and second, a new understanding of development. The
challenge for donor organizations is to unite these trends, and prevent
and combat corruption through an approach consistent with the new
development concept.
Corruption on the Agenda
The growing concern about corruption is caused by several reinforcing
factors. The end of the Cold War implied that highly corrupt regimes,
such as Mobuto’s in Zaire and Suharto’s in Indonesia, lost their strategic
importance and were faced with international condemnation. The
concept of globalization implies that corruption, too, is globalized and,
thus, becomes a global concern, particularly to international business.
The third factor that has commanded the attention of the development
community is the explosion of corruption and implosion of the former
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Soviet Union and part of Eastern Europe, and more generally, the rapid
increase of corruption in the 1980s experienced by many countries.
Some credit for the increased action against malfeasance should also be
attributed to Transparency International (TI). Since its inception in
1992, TI has been an exceptionally effective international pressure and
action group.
The international donor community is now ready to address
corruption in ways it had previously rejected. For decades, donors tended
to avoid explicitly addressing and criticizing its existence in developing
partner countries. However, over the last couple of years, the issue
suddenly has been placed at the center of the policy dialogue between
donors and their partner governments. At the operational level, the
leading bilateral and multilateral donor organizations have responded to
the concerns at two levels. First, they have stimulated and assisted anti-
corruption efforts in partner countries. Second, they have begun to re-
examine their internal practices and procedures to ensure their own funds
have not been misused.
The New Development Paradigm
The new development paradigm, characterized by the terms holism,
ownership, partnership, and results orientation, has emerged because of
a number of reasons. One is that research and evaluations have shown
that development assistance overall has been less efficient and effective
than expected; too little value for their money. There is an increasing
understanding that development results depend on multiple factors.
Input from one actor is only one of many variables that leads to
successful results. Improvement requires better coordination of
development efforts.
Another reason is the donor community recognizes that a prolifera-
tion of donor-supported projects has contributed to the disintegration of
national authorities in partner countries. Partners‘ central ministries,
today, have a weakened capacity to develop and implement policies and
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How to Prevent Corruption in Development Aid-Funded Projects and Programs
operational plans. They spend large proportions of their time responding
to and producing reports for the donors.
A third reason is that donors realize fungibility is a significant
element in development assistance. If the goal is to facilitate broad
development, there is little point in just looking at how they spend their
own money. Expenditure of donor funds on one priority sector or item
does not guarantee total allocations for that sector or item increases.
External assistance may simply enable the partner government to
reallocate its domestically generated funds for other items the donor
considers a lesser priority. Therefore, the totality of the partner govern-
ment‘s spending is what counts. This recognition has led donors to focus
their attention to government policies and their actual implementation.
The collaboration between donors and developing partner countries has
become more explicitly politicized. The new approach can be achieved by
applying some basic principles:
• The developing country must determine its goals and strategies. A
poverty reduction strategy is fundamental.
• Donors and partner countries should utilize a more holistic
approach. Sector-wide perspectives that lead towards the develop-
ment of national sector programs must replace individual projects.
Reject earmarked assistance and move towards budget supported
basket funding. For partner governments, this is only one step
towards untied and unearmarked support for their government
budgets.
• Donors should apply common procedures and accept joint
reporting.
Norway’s emphasis on the recipient responsibility principle is one
illustration of this new attitude. It was adopted as the leading principle in
Norwegian foreign aid in the early 1990s. The background is rooted in
the understanding that others cannot develop a country. Development
must be the fruit of its own people‘s efforts through trial and error. The
implication is the partner country, not the Norwegian Agency for
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Development or embassy staff, manages all funds. Donors can only stress
the importance of clear agreements and reporting requirements. The
partner’s ability and will to implement projects/programs, and ultimately
their success, are built on trust.
Challenges
Despite the extent and destructiveness of corruption in developing
partner countries, the donor community must not abandon the new
aid philosophy that emphasizes recipient leadership, program support,
and donor coordination. That philosophy is built on important
lessons that remain valid even though widespread corruption in
partner countries poses difficult challenges. The demand, now, is to
unite the two goals. Prevent and combat corruption while promoting
partner country led development through coordinated donor support
for national programs that are defined and implemented by the
recipient country’s authorities.
Administrative Improvements
The primary strategy must be to improve the recipient governments’
administrations and encourage reforms that reduce the opportunity for
corrupt behaviour. The main target area should be government’s
management of public funds. The donors’ interventions should be at
several levels and combine offers of assistance with demands for reform
and improvement.
Institutional Development
Intensified support for institution building and reforms in financial
management are key to institutional development. A large number of
aid receiving countries are reforming their government budget
systems including the administration of tax collection and other
revenue as well as budgeting, accounting, and auditing. The reforms
aim to establish more efficient and transparent systems, and constitute
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How to Prevent Corruption in Development Aid-Funded Projects and Programs
important elements in the fight against corruption as increased
transparent financial management reduces opportunities for em-
bezzlement and other corrupt practices. These reforms are in many
cases a prerequisite for donors to shift towards budget support for
national programs. Management reforms are also underway in key
sector ministries, usually linked to the development of sector pro-
grams. Close coordination of donor support is particularly important
in this area. Otherwise, a poor, aid-dependent country may end up
with budget management systems and principles in some sector
ministries that are different from and incompatible with those of the
central finance ministry. It will often be advisable to identify a lead
donor to the financial reform process in each country.
Donors should encourage reforms that force public authorities,
elected representatives, and bureaucrats at the local and central levels, to
be more accountable to their constituencies and clients. Because govern-
ments depend upon donors’ funds, there is a tendency for them to be
more accountable to donors than to their own citizens. This practice is
not only fundamentally undemocratic but also fails to foster a sustainable
check on corruption. Pressure from donors may in the short to medium
term contribute to curbing mismanagement, corruption, and other forms
of abuse of power, particularly in countries where civil society is weak.
However, the only long-term and effective control mechanism is a strong
civil society, with political opposition, an independent press, and service
users who demand their rights.
Awareness
To raise awareness, donors should address the corruption issue in their
policy dialogue with the highest levels of recipient governments. Con-
fronting it properly at that level gives legitimacy for lower level technical
staff to face concrete cases and promote anti-corruption measures in their
projects and programs.
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Transparency
In order to exercise accountability, one must have access to information
and power to sanction. In many parts of the world, a culture of secrecy
prevails which prevents the public from obtaining insight into the
dealings of government. The donor community should encourage
developing partner countries to undertake reforms that improve trans-
parency in public administration and give citizens easier access to
information. And last but not least, donors should promote democratic
control over the executive. Parliaments and elected local councils have to
be substantially strengthened so they are capable of exercising formal
control functions over the central and local governments.
Competence
Donor agencies must increase their knowledge of partner countries’
administrative systems, not only in central and local governments but
also in civil society and the private sector. They must be familiar with the
formal administrative structure and procedures, prevailing bureaucratic
culture, and the quality of management in collaborating institutions.
Donor agencies’ thorough knowledge of partner institutions will enable
them to identify weak links and danger zones that are particularly prone
to corruption before granting support and entering into collaborative
agreements. Then, effective assistance can be instituted to limit the scope
for corrupt behavior.
The need to know more about partner countries’ institutions is not
only motivated by the struggle against corruption. Such knowledge is
required if donors are serious partners who constructively assist in
strengthening important institutions and building good governance.
Selectivity
Each donor should concentrate its engagement on the number of partner
countries and sectors that it has the capacity to handle without sacrificing
professional demands. The capacity of aid administrations tends to be
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How to Prevent Corruption in Development Aid-Funded Projects and Programs
strained, particularly in local field offices/embassies, making it difficult
for staff to closely monitor their work with partner institutions.
It takes several years to establish sufficiently good systems and
practices of financial management in weak institutions that have a
prevalent culture of corruption. Responsible donors must carefully assess
the quality of management before a program’s inception, and, if neces-
sary, establish temporary, complementary external control mechanisms.
They must design programs without too many demands for recipient
partners, thus, undermining reforms, and institution building efforts; and
act as joint external control mechanisms, perceptively avoiding separate
control systems. It is important to create a clear and visible monitoring
process and system from the onset, emphasizing prevention rather than
post controls such as an inordinate reliance on auditing of program
funds. Donors must increase clarity by demanding that objectives,
expected outputs and results, and management mechanisms are specifi-
cally outlined in program documents; and clearly define the rights and
obligations as well as the sanctions of both/all parties. They must
strengthen the focus on results and achievement. Combating corruption
must not lead donors to overly emphasize expenditure controls. The
ultimate goal for development aid-funded projects and programs is to
achieve the desired change in our partner countries.
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Preventing Corruption in German Financial Cooperation with Developing Countries
Preventing Corruption inGerman Financial Cooperationwith Developing Countries
Martin Dorschel
DEVELOPMENT COOPERATION PROJECTS GENERALLY INVOLVE a considerable risk
of corruption. Like all other development cooperation organizations,
Kreditanstalt für Wiederaufbau (KfW) has to determine what it should do
to avert corruption in projects that it funds. KfW has developed its
projects over the past three years in a targeted fashion, utilizing all
available resources to prevent fraud and abuse. In this way, acts of
corruption are systematically made more difficult. In individual cases
where they do occur, sanctions are imposed. This paper explains how
German financial bilateral cooperation projects utilize such measures to
avoid corruption.
What is corruption? One possible definition is the exploitation of a
politician’s or civil servant’s position for personal gain. Other definitions
also include the private sector. Corruption is an offense which generally
takes two, a briber and a bribed person or organization.
Corruption is not limited to what might be called “classic” bribery
for the reward of public contracts. Bribes are also paid for the award of
licenses and approvals, and the creation or preservation of monopolies.
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Dorschel
The misappropriation of public funds, the use of confidential informa-
tion such as zoning plans, obstruction of justice, extortion such as threats
of tax inspection, the sale of jobs or promotions in public service, and
nepotism are other forms of corrupt actions.
Causes and Effects
The basis of KfW’s efforts to prevent corruption in financial cooperation are
two, seemingly trivial, but fundamental findings about its causes and effects.
1. Corruption is neither an unavoidable, negligible side effect nor a
lubricant for economic growth. It is damaging in all its forms. It
reduces private investment, hampers private sector activity,
directs capital and human energy towards unproductive areas,
diminishes the quality of public services, and ultimately under-
mines the legitimacy of the entire public sector. In extreme cases,
kleptocratic governments and administrations cause the social,
political, and economic collapse of countries. Therefore, KfW
professes its clear commitment to actively prevent any form of
corruption.
2. Corruption is less a socio-cultural phenomenon of particular
societies, meaning developing countries, as is frequently believed,
than the consequence of bad incentive systems and inadequate
control and sanction mechanisms. Corruption tends to be
stronger where there is a high degree of governmental regulation
or intervention such as foreign exchange control, trade restric-
tions, subsidies, and price controls that coincide with discretion-
ary powers of decision making, and where there is a lack of
control and sanctions.
Prevention of Corruption Versus the Fight Against
Corruption
Prevention means averting individual acts of fraud and abuse. Fighting
corruption, on the other hand, reduces the level of malfeasance in an
institution or country.
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Preventing Corruption in German Financial Cooperation with Developing Countries
The fight against corruption has to be conducted by a country’s
citizens, enterprises, and institutions. Development cooperation can
only support endogenous changes but not replace them. The question
under what conditions and how corruption can be substantially
reduced still remains largely unanswered. Why have measures to
combat it been a sweeping success in some countries such as Hong
Kong and Italy where corruption had been rampant for decades but not
in others? An analysis of the few successes and the many failures is
necessary to resolve this question.
Mere institution building, the creation of control and sanction
mechanisms, such as courts of auditors, tax inspection, a reformed
judiciary, are obviously not sufficient and may, on the contrary, even
create possibilities for personal gain in these very institutions, which have
discretionary and decision-making powers.
KfW’s scope for action focuses mainly on the prevention of
corruption. Considering the aforementioned causes, the main points of
intervention are KfW’s participation in the selection of sectors, projects
and project partners, influence on cooperation partners and project
conceptions, the restriction of discretionary powers to decide the
creation of control mechanisms, and, if necessary, the imposing of
sanctions. Each corruption-free project financing is a positive example
and involves ensuring that the proper knowledge of accounting and
management regulations and methods are transferred to project
partners. Correct proceedings and exemplary incorruptibility can
support structural change.
Internal Organization and Procedures of KfW
For effective and exemplary prevention, it is necessary that not only
projects withstand close examination but also those organizations
responsible for the planning, design, implementation, and/or financing of
the projects should be carefully scrutinized.
German bilateral development cooperation management practices
separation of project appraisal and monitoring, regulated by KfW, and
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Dorschel
project design and implementation, which are the responsibilities of the
project-executing agency. This practice avoids conflicting interests within
KFW, creates transparency and openness, and allows mutual control.
KfW applies essential rules of organization, which are also effective for
corruption prevention. They include clear responsibilities for each project,
job rotation of loan officers and project managers, the principle of double
checking and double signature, and written documentation of all major
decisions. These principles are completed by internal and external control
mechanisms, internal audits, and regular local controls for fund activity
conducted by a German government commissioned auditor.
Corruption Prevention in Practice
There are different risks of corruption in the project cycle: (1) at the
design and planning stage, (2) during contract award, and (3) during
implementation. In the design phase, KfW closely appraises the
project-executing agency, particularly with regard to corruption risks, and
influences the design of the project if necessary. Projects with unmanage-
able risks are rejected.
The central prevention instrument in the contract award phase is the
insistence on competitive procedures. Contracts for supplies and services
in financial cooperation projects are awarded by the executing agency
following public competitive bidding. A direct contract award is the
exception and is limited to justified cases, such as spare parts for a
particular type of machine. The awarding procedure requires that KfW
and, sometimes, KfW-approved independent external experts verify all
awards of the executing agency.
During the implementation phase, which often extends over several
years, there are risks, for example, of subsequent changes to existing
contracts, which cannot always be avoided, and the acceptance of
improperly or partially performed services. Payments by KfW to
suppliers and service providers are only made upon evidence of services
rendered. Independent consultants are often employed to oversee
construction supervision and receive supplies and services. If there is
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Preventing Corruption in German Financial Cooperation with Developing Countries
ground for suspicion, KfW charges external experts to control supervi-
sory functions and acceptance decisions. If suspicions are confirmed,
KfW refuses to make further disbursements and collects the funds that
have not been used for their stipulated purpose.
Further Developments
At the end of 1997, KfW began to systematically analyze the weaknesses
of this system of regulations and procedures. A team of ten staff mem-
bers from various fields of operations such as the Secretariat of Foreign
Credit Affairs and the regional, technical, and legal departments tried to
identify potential gateways to corruption. For this purpose, the entire
project cycle was examined in order to detect those spots where corrupt
action is possible and formulate proposals for prevention. The results
were presented on thirty pages in August 1998 in the paper “The Problem
of Corruption in Financial Cooperation.”
The paper concludes that existing procedures are generally
very suited to making corruption considerably more difficult. The team
identified isolated deficits in the implementation of the rules and the
documentation of decision-making processes. Based on the recom-
mendations of the analysis, several regulations, proceedings, and
procedures have been further developed. For example, the new edition
of the “Guidelines for Consultants” explicitly mentions corruption as an
offense, reinforces the element of competition, and increases the
possibilities for sanctions.
The report also recommends testing future improvements; for
example, the introduction of approved sanctions in proven cases of
corruption, similar to the “integrity pacts” proposed by Transparency
International (TI). The goal is to apply controls and sanctions not only to
the potential recipient of bribes but to extend them to the briber, and
ultimately to achieve a broad consensus to outlaw both active and passive
corruption. KfW is a member of TI and exchanges information and
experiences on the subject of corruption prevention with other institu-
tions and firms.
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Dorschel
Impacts on the Fight Against Corruption
Preventing concrete instances of malfeasance is a necessary, but not a
sufficient condition for combating corruption. Reducing the level of such
behavior is the parallel component in this fight. Of central significance in
this respect, are the overall legal, economic, and political conditions.
Prompted by the OECD, German legislation has recently improved the
framework for preventing and fighting corruption. The German
Ministry for Economic Cooperation and Development underscored its
commitment to reform when approximately eight years ago it introduced
five development policy criteria and, in 1997, prescribed the
anti-corruption clause in intergovernmental agreements. Already in
1998, KfW suggested the Ministry incorporate an explicit and judicially
valid anti-corruption clause in financial cooperation project agreements.
The Development Ministry plans to concentrate more on develop-
ment cooperation in a limited number of countries and sectors. This new
emphasis makes it possible for the Ministry to insist on the inclusion of
framework conditions conducive to development, including the consis-
tent implementation of measures to prevent corruption. These structural
measures of bilateral financial cooperation targeted at improving
transparency and accountability can effectively support the political
efforts of the German government.
85
Transparency in Procurement
Transparency in Procurement
Michael H. Wiehen
PROCUREMENT OF GOODS AND SERVICES by public bodies worldwide is prone to
corruption involving aggressive sellers and/or greedy officials. Now that
under the Organisation for Economic Co-operation and Development
Convention of 1999 cross-border bribery of public officials is becoming a
criminal act in most industrial countries, emphasis should be placed on
corruption prevention. Increasing the transparency of the entire procure-
ment process will reduce the opportunity for abuse and manipulation.
Transparency International (TI), a non-governmental organization
fighting globally against corruption, presents a catalogue of suggestions,
which have been tested in many places. TI believes firmly that the
application of the principles of integrity, transparency, and accountability
to all decision making on major public investments and purchases will
maximize the economic, financial, social, environmental, and political
benefits. Inter alia, TI presents its concept of the Integrity Pact, which
binds principal and bidders to a specific contract to disclose all commis-
sions and abstain from bribery.
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Wiehen
Procurement Principles
Transparency means that institutions, processes, and decisions are made
accessible to the public at large or to representatives of the public so that
processes and decisions can be monitored, reviewed, commented upon,
and influenced by the stakeholders. It is essential to create transparency
from the very beginning so that potentially every step in the long deci-
sion-making process can be influenced, if necessary, in a timely manner.
For example, in electric power or irrigation projects, the entire process of
considering alternative sources of power or water, alternative siting or
designs, and the environmental and social aspects of the proposed project
needs to be carried out in full transparency for the protection of the
people in the project area and of the environment. In addition, transpar-
ency ensures the integrity and eventual economic justification of the
investment. Indeed, the assessment should start with questioning the
need for additional power generation capacity or water flows. Often
efforts directed at reducing demand by better transmission and distribu-
tion efficiency, or better demand management, or better time manage-
ment of water flows can be much more economical and profitable than
new major investments.
Transparency in this context is not achieved by grudgingly allowing
access to some internal documents to selected people. Transparency
requires that the government or project agency, the principal, voluntarily
and proactively provide full public information through the print and
electronic media about the potential options, plans, designs, and pro-
grams.
Country experiences demonstrate that a series of well-publicized
open hearings is a particularly effective means to spread information and
to obtain the stakeholders’ commitments, contributions, and support for
a large project. For the construction of a new subway line in Buenos Aires,
for example, three large public hearings were held where the Mayor of
Buenos Aires2 explained the plans and invited comments and suggestions
such as on the siting of the line, the location and design of the stations,
the process for selecting the construction companies, etc. The hearings
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Transparency in Procurement
were a huge success. They were broadcast live on local TV and videotaped
for later reference.
Another powerful instrument for achieving transparency is the use of
the Internet. Against all claims from some quarters that the openness of
certain procurement process information would undermine and erode
the quality of the process and endanger the entire project, several
countries including Mexico, Chile, Colombia, to some extent, and most
recently Austria, and major municipalities such as Seoul, Korea, have
recently placed their entire procurement information system on the web
and allow free access to it. Increasingly, any interaction between the
administration and private companies, presently under contract or
wishing to obtain government contracts, and citizens in general, will be
handled through this medium. If contracting information, such as types
of contracts, conditions and stipulations, competitors, and pricing is
always available on a real-time basis, the opportunity for manipulation
and, thus, the temptation to bribe is greatly reduced.
Transparency also means that all the stakeholders of a major
investment are fully informed and consulted about all aspects of the
project. For example, on large dam projects it is essential that the affected
population at large be allowed and encouraged to participate in the
process. It may be necessary to reach out to them through visiting teams
and, in particular, one must not rely on political representatives who
normally are elected or chosen in other contexts and for different
purposes. It is also most important that this consultation process is
conducted with integrity, utilizing up-to-date and complete information
for the stakeholders.
The projects which were prepared in secrecy or with severely limited
information for the stakeholders and eventually ran into public resistance
or turned out to be tainted by corruption and then were held up for years,
are legion. This process may appear time consuming and costly but it is
irreplaceable and will in the long run save time as well as costs.
While the importance of transparency is publicly accepted by many
governments and institutions, most, including some international
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Wiehen
financial institutions, may pay lip service to it, but, in reality, practice a
policy of secrecy or a high degree of confidentiality. Change will be hard
to achieve, but it will bring untold benefits.
Monitoring Contracts, Implementation, and Operations
An essential instrument for assuring the propriety and correctness of
the contracting and implementation processes is systematic and reliable
internal and external supervision and monitoring by people with the
necessary expertise and adequate resources to carry out that obligation.
Officials who were not involved in prior stages of the process should do
internal supervision and auditing. Foreign donors and lenders includ-
ing the International Financial Institutions (IFI) will normally retain
the right to control the supervisory process. However, it rarely provides
the necessary density of monitoring in space and time of an indepen-
dent audit, which is an assurance of full compliance with the contract.
Host governments cannot hide behind the IFI’s supervisory rights and
argue that IFI’s management substitutes for the government’s obliga-
tions. Adequate supervision and monitoring are the full responsibility
of the principal.
External monitors, either a civil society organization or a profes-
sional Independent Private Sector Inspector General (IPSIG), perform
very effective monitoring. TI recommends governments invite civil
society organizations, including but not necessarily limited to TI National
Chapters (TI-NC), to monitor the entire process, from the planning and
preparation phase to the final decommissioning. Civil society’s access to
the necessary expertise is critical in this context; qualified personnel may
be available within the organization or contracted from outside.
In several documented cases, especially in Argentina, Colombia, and
Benin, civil society and especially TI-NC have played critical and highly
effective roles in encouraging governments, officials, contractors, the
private sector, and the media into accepting and executing a transparent
approach. Two issues that have plagued TI-NC consistently in this respect
are (1) access to expertise and (2) funding for activities both during the
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Transparency in Procurement
preparatory/contracting phase and during the much more involved and
staff-intensive implementation phase. As far as the expertise is concerned,
TI’s group of international resource persons is slowly growing even
though still much more effort is needed to accelerate and systematize the
development and the broad accessibility to such expertise. But as the use
of TI’s recommended procurement transparency efforts grows, it is
becoming clear that TI, alone, will not be able to meet all needs in this
regard. Both during the contracting phase, and especially during project
implementation, TI-NC may rely more and more on technical experts
found in the market. This, of course, further increases the monitoring
obligations of the TI-NC and it exacerbates the second issue, that of
funding TI-NC activities. In those countries receiving development
assistance, some of the smaller bilateral donors in the past have been
highly supportive and likely will continue to be supportive in covering
such expenditures. In more developed countries, the cost of TI-NC
exercising this function may have to be covered, at least in part, by the
government although one must take extreme care that reliance on
government funding will not undermine or jeopardize the critical
element of independence.
Another issue encountered is the legitimate confidentiality of
proprietary information. Oftentimes, civil society representatives gain
access to such information. However, contractual stipulations can ensure
appropriate protections, as has been effectively demonstrated. When
designing the monitoring role for civil society, one should look at the
following criteria:
• Monitors should be highly respected people of unquestionable
integrity.
• Monitors should possess, or have easy access to, the required
professional expertise.
• Where local members of civil society do not possess the required
expertise, they should promptly contract such expertise from
outside including, when necessary, from overseas. Unqualified
personnel conducting audits means that problems may not be
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Wiehen
discovered, convincing professional corrective proposals cannot be
submitted, and monitors do not gain the respect of the officials.
• Individual monitors should not be subject to a veto by government.
• Monitors should have free and unlimited access to all relevant
government documents, meetings, and officials.
• Monitors should raise issues and complaints first with the authori-
ties and go public only when no corrective action is taken within a
reasonable period.
• Monitors should be prepared to offer a limited pledge of confiden-
tiality regarding certain types of business proprietary information.
• Monitors should have full access to and review the tender
documents, the evaluation reports, the award selection decision,
and the implementation supervisory reports, technical as well as
financial; they should participate in meetings and have the right
to ask questions.
Where no suitable civil society organization exists, or where the
government has insurmountable objections to the involvement of civil
society, it may instead employ what in some United States cases has
been called an Independent Private Sector Inspector General (IPSIG).
The IPSIG, a private sector company or group of individuals, would, of
course, come with the necessary expertise and have all the rights listed
above for civil society organizations. Such an arrangement can be
acceptable provided the IPSIG is given not only full access but also has
the contractual right to seek correction of any procedural problems or
improprieties and, if no correction takes place, to inform the public of
the impropriety.
The TI Integrity Pact Concept
TI created the Integrity Pact (IP) to assist countries that are prepared to
introduce transparency and integrity into their contracting and imple-
mentation processes and wish to set a public precedent of their commit-
ment. It developed the IP concept, originally called the Islands of
Integrity concept, in the mid-1990s. The main criteria are
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Transparency in Procurement
• a pact or contract between a government office that is inviting
contractors or suppliers to submit tenders for a public sector
project, the principal and those companies submitting a tender for
a specific project, the bidders;
• an undertaking by the principal that its officials will not demand
or accept any bribes, gifts etc., and violators receive appropriate
disciplinary or criminal sanctions;
• a statement by each bidder that it has not paid, and will not pay,
any bribes “in order to obtain or retain this contract” thus,
excluding facilitation payments;
• an agreement by each bidder to disclose all payments made to
anybody, including agents and other middle men as well as
officials’ family members, in connection with the contract in
question;
• the explicit acceptance by each bidder that the no-bribery commit-
ment and the disclosure obligation as well as the attendant
sanctions remain in force for the winning bidder until the contract
has been fully executed;
• undertakings on behalf of a bidding company will be made “in the
name and on behalf of the company’s Chief Executive Officer;”
• bidders are advised to have a company code of conduct clearly
rejecting the use of bribes and other unethical behavior and a
compliance program for the implementation of the code of
conduct throughout the company;
• a preannounced set of sanctions for any violation by a bidder of its
statements or undertakings, including (1) denial or loss of
contract; (2) forfeiture of the bid security; (3) liability for damages
to the principal and the competing bidders; and (4) debarment of
the violator by the principal for an appropriate period of time.
The IP will establish contractual rights and obligations of all the
parties in the procurement contract and, thus, eliminate uncertainties as
to the quality, applicability, and enforcement of criminal and civil legal
provisions in a given country. This means that applying the IP concept
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Wiehen
can be done anywhere without the normal lengthy process of changing
local laws. The IP is intended to accomplish two primary objectives:
• It enables companies to abstain from bribing by providing
assurances to them that (1) their competitors will also refrain from
bribing, and (2) government procurement agencies will act to
prevent corruption including extortion by their officials and to
follow transparent procedures.
• It enables governments to reduce the high cost and distortionary
impact of corruption on public procurement.
Beyond the individual contract in question, the IP is, of course, also
intended to create confidence and trust in the public decision making
process in general, a more hospitable investment climate, and public
support within the country for the government’s procurement, licensing,
and privatization programs. The IP was designed to give civil society a
key role in overseeing and monitoring the correct and full implementa-
tion of the pact.
This concept is suitable not just for construction and supply con-
tracts, but equally for the selection of
• engineering, architectural, or other consultants;
• the buyer/recipient of state property as part of a government’s state
asset privatization program; and/or
• the beneficiary of a state license or concession for oil or gas
exploration or production, mining, fishing, logging or other
extraction rights, or for government regulated services such as
telecommunications, water supply, or garbage collection services.
A growing number of countries are applying or testing the Integrity
Pact. The concept of a contractual arrangement appeals to many govern-
ments as well as corporations acting globally. A current status report on
the application of the IP is routinely on the TI website
www.transparency.org.
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Transparency in Procurement
Notes
1. This is an excerpt from a comprehensive paper, which summarizes
Transparency International’s (TI) position towards this issue. This
excerpt focuses on the areas in which TI most notably goes beyond
the state of the art as reflected in the procurement guidelines of the
World Bank Institute and similar organizations. TI requests a higher
level of transparency in the procurement process, recommends the
involvement of civil society in monitoring the process, and, with its
Integrity Pact, offers a tool to increase responsibility of bidding
companies and of civil society for different forms of procurement.
2. Recently elected as the new President of Argentina—the people
reward honesty!
97
Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
Improving Coordination ofAnti-Corruption Policies andActivities by Donor Agencies
Jeremy Clarke
THIS PAPER EXAMINES ISSUES OF coordination and collaboration between
donors as they develop their response to the problem of corruption in
poorer countries. In the section Donor Policies and Existing Coordina-
tion Frameworks, current donor policies and coordination mechanisms
are briefly described. The importance of working within the context of
Poverty Reduction Strategies is stressed in the section Reaching Consen-
sus on Tackling Corruption. The paper concludes with a discussion of
specific suggestions for strengthening donor coordination in developing
countries and for promoting interagency collaboration.
Donor Policies and Existing Coordination Frameworks
It is only within the last decade with the ending of the cold war and the
development of an international consensus in favor of democratic
governance that action to combat corruption has become feasible.
Developing and transitional governments and donor agencies can now
openly discuss tackling corruption, creating a climate that promotes
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Clarke
development and reduces poverty. High levels of corruption have made it
more difficult to generate the confidence and trust necessary for effective
and open relationships. Pressure for such action comes from a number of
sources. Often the public has demanded action in poorer countries where
corruption is endemic. In some, such as Indonesia, it has been fed into
the political process and in others, such as Kenya, people have made less
dramatic but persistent demands for change. At the same time, parlia-
ments and taxpayers in developed countries want to ensure that develop-
ment assistance is used effectively for poverty eradication.
These concerns have yet to translate into a fully coherent donor
response. More donors are producing anti-corruption policies and
strategies, and there is a broad consensus on the nature of the prob-
lem and the range of issues they want to address. However, there is
not a common understanding among donors about how best to
facilitate effective action. No international donor forum exists for
dealing regularly with the development aspects of corruption. Trade
Ministries are undertaking work on the Organisation for Economic
Co-operation and Development (OECD) Convention against bribery.
Efforts to curb international money laundering are led by ministries
of finance but development ministries often do not have a voice in
these discussions.
In developing countries, donors also face constraints. Existing
coordination mechanisms have often been unable to prevent duplicating
efforts or effectively coordinating donor action. Activities have often
overlapped or been fragmented. In some cases, a degree of competition
has risen between donors. Although there are no major differences in
policy, the priorities and areas identified by donors for action inevitably
reflect the mandates and expertise of their organizations. This leads to
some differences of emphasis and approach among donors. For example:
The International Monetary Fund (IMF) attaches high priority to
improving the economic policy environment and seeking transpar-
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
ency in budgets and public expenditure. It does not seek to tackle
corruption more generally in member countries.
The World Bank and United Nations Development Programme
(UNDP) emphasize a comprehensive approach to combating
corruption focusing on strengthening public sector institutions.
Although the World Bank recognizes the importance of the political
aspects of malfeasance, it does not address them directly in country
programs.
Bilateral donors are able to address political corruption but may
lack the knowledge and expertise to prepare anti-corruption policies.
They also emphasize the importance of addressing corruption in
international trade and finance recognizing that this must include
measures in developed and middle-income countries where the
problems often originate.
Donor coordination is carried out formally and informally at the
international level, and in poorer countries. Numerous options move
donors toward a common approach and aid agreement on collective
action in developing countries. The options that are discussed in this
paper are outlined below.
Poverty Reduction Strategies and Comprehensive Development
Frameworks constructed by developing and middle-income coun-
tries potentially create an opportunity for donors to support the
development and implementation of anti-corruption plans.
The Utstein donors have developed a closer working relation-
ship at the ministerial, official, and country levels and are considering
jointly financing programs. This could form the basis for a core
group of bilateral donors to work more closely together on anti-
corruption strategies.
Ad hoc donor groups address key strategic issues in a number of
fora such as special programs for Africa. An ad hoc group on
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Clarke
corruption could also be a vehicle for exchanging information and
agreeing upon action.
Reaching Consensus on Tackling Corruption
Poverty Reduction Strategies and Comprehensive Development
Frameworks
Poverty Reduction Strategy Papers (PRSPs) are being developed as the
basis for concessional lending by the International Financial Institutions
(IFI) and for debt relief under Heavily Indebted Poor Countries Initiative
(HIPCI). This aim is to link these to a longer term Comprehensive
Development Framework (CDF), which will also be prepared by the
recipient countries’ governments in consultation with the private sector
and civil society. By providing a strategic framework for development,
the PRSP and the CDF can create a focus for collective donor action on
governance and corruption.
The preparation of a PRSP is at an early stage in most countries. The
interim PRSP for Bolivia contains no specific commitments to tackle
corruption. Linkages to the existing anti-corruption strategy, which is set
out elsewhere in the CDF and prepared by that country (see Box 1), are
also weak. In contrast, reducing corruption is an explicit goal in the
Uganda Poverty Eradication Plan. In that case, the anti-corruption effort
is outlined with an emphasis on improving transparency and the effec-
tiveness of public expenditure.
In countries facing endemic corruption, donors need to encourage
poorer countries to prepare PRSPs and CDFs, which contain specific
commitments and targets for tackling the problem. These can provide a
framework for government action and donor support as well as a baseline
for future monitoring of the anti-corruption effort. Targets can be set in
relation to the country’s public expectations and past performance; other
regional countries; or existing international standards.
If the PRSP and the CDF are to make explicit commitments to
tackling corruption, they will need to be based on a well thought out anti-
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
corruption plan. Developing countries may need a clearer idea of what is
expected by the donor community. In the cases of Bolivia, Uganda, and
Tanzania, some important areas appear to have been ignored. For
example, political corruption is not directly addressed although in all
three countries this is a major problem. Similarly, there are no direct
mechanisms for tackling money laundering or for promoting improved
integrity in the private sector.
Where government is willing to develop a long-term vision, which
addresses all the major constraints on development, the CDF can be an
effective vehicle for tackling corruption issues. The recent Bolivia CDF
contained a specific plan, which is being used as a framework for donor
support. CDF pilots in other countries could also be used to tackle
corruption issues in the same way provided the governments involved see
this as a priority.
Middle-Income Countries
The PRS process is applicable to highly indebted International Develop-
ment Assistance countries dependent on concessional finance, or to those
Box 1: Bolivia—Corruption and the Comprehensive Development
Framework
Bolivia launched a national dialogue in 1997, which included a four pillar action
plan—opportunity, equity, dignity, and institutionality. Corruption was seen as a
major obstacle that demanded direct action through a national anti-corruption
program and parallel efforts to enhance the effectiveness, transparency, and
accountability of public institutions.
The anti-corruption program is comprehensive including specific measures
such as asset declaration by public officials, enhancing the capacity of the audit
office, and action to increase constraints on corruption by strengthening the
judiciary and reforming civil service. It also aims to improve transparency by
improving government financial systems. Agreed targets included compliance
with recommendations of the Comptroller of Audit.
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Clarke
developing countries seeking IMF support. Middle-income countries,
which also face substantial corruption problems, are not covered by these
arrangements. In these cases, IMF lending may also create opportunities
for addressing corruption where countries require external finance but
are not eligible for International Development Assistance (IDA) or
HIPCI. Past IMF lending to Russia and Ukraine has required an audit of
systems and agreements to address corruption, which would otherwise
have macroeconomic consequences. In non-reforming countries like
Kenya, the IMF has also been instrumental in pushing for sanctions
against those involved in major scandals.
Non-Reforming Countries
Countries should not be penalized by development agencies for present
weaknesses in their governance, including corruption, if they are commit-
ted to reform. Where countries do not show a commitment, develop-
ment agencies will, in the interests of poverty eradication, want to
encourage them to move toward a more positive stance on governance
and anti-corruption. Donors need to balance the desire to remain
engaged and to address the needs of very poor countries while creating
sufficient incentives for improvement. If some donors suspend or reduce
assistance while others increase support, governments receive mixed
messages, possibly damaging development efforts.
In countries where government commitment is lower, donors may
need to organize specifically to create pressure for change. In Kenya,
donors jointly took an initiative to establish a formal group with broad
membership, which brought together the IFIs and all the major bilaterals
in a collaborative framework (see box). The primary bilateral donors
worked closely with the IFIs in preparing the donor position and sup-
porting a dialogue on behalf of the donor community. This is a possible
model for many poorer countries where anti-corruption efforts are at an
early stage and coherent government plans have yet to emerge (see Box 2).
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
Donor Coordination and Collaboration
Donor coordination and collaboration arrangements will reflect govern-
ments’ approach. Where there is a national plan of action government
can link projects in different sectors and institutions in an integrated anti-
corruption program. Donors then have an incentive to work towards
common goals and can more easily coordinate their efforts through the
established government mechanisms. Uganda is moving toward this type
of arrangement (see Box 3), which may have more general application
within receptive governments.
The multilateral agencies can play a useful role in organizing donor
meetings and in representing the wider donor view in the policy dialogue.
The World Bank has played a prominent part in addressing corruption
issues and, in many countries, has been invited to provide advice to the
highest levels of government. The UNDP has a donor coordination role
in some countries and is giving greater prominence to governance and
corruption issues in its work. The European Community can also
provide a link between its member states and other bilateral groups, such
as the Utstein donors, which are useful in promoting collective action.
Box 2: Donor Coordination Efforts in Kenya
The Economic Governance Group (EGG) in Kenya, chaired by the World Bank,
included the IMF, UNDP, European Community, and the primary bilateral
donors. A matrix of proposed policy commitments and actions to improve
governance was developed and used by the group for policy dialogue with the
government. They agreed on a joint donor strategy, which focussed on early
action by government to complete investigations into financial scandals, and to
establish and finance an effective anti-corruption effort. EGG received a well-
coordinated donor response that contributed to the government’s position as
reflected in current reforms. The IMF was instrumental in sustaining pressure for
action through regular country reviews. EGG’s membership enabled the IMF to
represent a broader donor view.
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Taking a Program Approach: Utstein Initiatives
The Uganda case suggests there may be scope for developing a more
program based approach to tackling corruption. As a minimum, this
would draw together the various anti-corruption and institutional
development efforts in a planning framework, which would include all
relevant government institutions and donors. However, there may also be
potential for closer donor collaboration, for example, through joint
financing and disbursement arrangements for particular institutions or
sectors where more than one donor is involved.
Joint programming and financing of donor anti-corruption initia-
tives is more likely when donors are strongly committed to work together.
The Utstein group of donors has agreed, in principle, to take this ap-
proach on a pilot basis in a developing country. The aim is to promote
joint use of expertise, develop common procedures, and pool resources.
Discussions are underway in Tanzania about collaboration in a number
of sectors (see Box 4). A similar initiative could be considered in relation
to anti-corruption work in Uganda or elsewhere.
Box 3: Uganda Anti-Corruption Program
The government has approved for 1999–2002 an anti-corruption plan, which
aims to improve coordination and implementation of anti-corruption efforts
across government. The Ministry of Ethics and Integrity presides over an inter-
agency forum on corruption and coordinates all activities. Several public
institutions are involved including Parliament, the judiciary, the Inspectorate of
Government, the Directorate of Public Prosecutions, and the police. The forum
has regular meetings with donors, which has encouraged joint planning and
improved coordination of donor programs. This has already led to increased
collaboration between donors working with the IGG and in the legal sector and
more effective implementation overall.
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
Taking A Governance Approach
Another possible starting point for donor collaboration on corruption is
work at the country level on governance issues. In Indonesia, the
government, World Bank, UNDP, and civil society are jointly carrying out
a governance assessment, which identifies priority areas for action and
donor funding. A similar approach by the two agencies in Bolivia led
directly to joint anti-corruption activities.
Government and donors need to establish close links to share
information, coordinate policy, and agree on priorities for governance
and anti-corruption activities. In Indonesia, a board chaired jointly by
the UNDP and the Bank has been established to undertake policy
dialogue and develop governance programs with representatives from
government and all the main donors. They have also established a trust
fund to channel donor funds and finance work on governance and
corruption issues. Such arrangements are likely to be more effective if
Box 4: Utstein Donor Collaboration in Tanzania
Utstein donors primarily support the multilateral debt fund and sector improve-
ment programs (SIPs) in health and education, and public service reform where
pooling arrangements for donor funding are already in existence. Areas of
collaboration include:
· sharing documentation when initiating commitments such as use of the
United Kingdom appraisal document for future support by the Dutch
Government in health;
· agreeing to joint appraisal and annual review missions to minimize
duplication and overburdening government;
· harmonizing and developing common donor systems for disbursing funds
for program support and allowing one donor to transfer funds to another
to support specific activities;
· moving toward direct budgetary support linked to government strategies
and action plans and the achievement of agreed outcomes.
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donors feel they offer genuine opportunities for dialogue and influence
leading to an agreed policy framework and action plan. This requires an
inclusive process, which involves the entire group of primary local
stakeholders and donors, and allows their voices to be heard. It is also
important that the World Bank and UNDP identify the donor best suited
to take the lead in areas or activities where they have particular expertise
or large commitments.
Promoting Increased Donor Collaboration
There are three areas where donor collaboration and collective action can
be strengthened in the future:
1. Development agencies can play a more active role in extending
existing international efforts to curb corruption such as money
laundering and bribery by developed country businesses.
2. Donors can do more to prevent the misuse of development
assistance by improving donor and recipient procurement,
financial management, and audit systems.
3. Increase resources and technical support, which help poorer
countries develop and implement anti-corruption strategies.
Similarly, donors can support efforts to promote South-South
learning and monitoring of anti-corruption efforts.
Extending the International Effort
The Ministries of Home Affairs and Trade are implementing the OECD
Convention on bribery of public officials. Donor agencies have a role in
presenting the development perspective. Additionally, the OECD should
increase its efforts to publicize the Convention and encourage business
sector compliance. Donor agencies can help by strengthening the
capacity of the OECD to undertake such tasks, which could include
financing publicity campaigns and assisting chambers of commerce and
international firms to develop suitable guidelines.
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
Some middle-income countries require parallel efforts by firms to
tackle bribery. Without these efforts, OECD firms continue to face unfair
and dishonest competition and the impact of bribery. Donor agencies
could jointly support regional efforts to develop conventions similar to
the OECD convention.
Money laundering allows corrupt leaders in developing countries to
benefit from their actions by facilitating the illegal removal and retention
of funds. The OECD countries need to assess the adequacy of their
legislation on corruption and money laundering and, in particular, ensure
that they treat any dishonestly acquired funds as money laundering; and
support legal action by foreign governments to recover illegally acquired
assets. The Financial Action Task Force (FATF) established by the OECD
countries aims to coordinate these efforts and promote cross border
cooperation by member states.
Donors can be more active in supporting FATF by developing a
coordinated effort to press for action by their own governments. Ongo-
ing efforts are attempting to establish regional bodies with similar
responsibilities as the FATF. An active regional group already exists in the
Caribbean as well as plans for similar organizations in Asia and East/
Central Africa. The Department for International Development (DFID)
in London is exploring possible support for these initiatives but it would
be more appropriate if all donors under FATF auspices collectively
developed and financed such activities.
Donors could do more to encourage middle-income and developing
countries to tighten anti-corruption legislation. Tighter money launder-
ing laws could reduce the scope of offshore tax shelters for corrupt
individuals or criminal activities. Tougher statutes could help prevent
bribery in trade and economic activity.
Donor Action to Protect Development Assistance from Corruption
Many donors have acted to strengthen their own procurement systems.
Sharing this experience will promote improved practices among donors.
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Collective action is also required to deal with “blacklisting” firms sus-
pected of malpractice or bribery to win development assistance contracts.
The World Bank operates a Fraud and Oversight Committee, which
reviews possible cases within Bank programs. If the Bank can provide
legally defensible information to substantiate the blacklisting, then other
donors should be prepared to blacklist these firms and support legal
action when necessary.
A collective donor effort can increase accountability for development
assistance by providing information about development spending and
program performance. Such information is especially important in
developing countries as it will create opportunities for civil society and
the entire public to pressure their governments into effectively utilizing
development funds. There may be scope for joint donor initiatives in
particular developing countries.
Donors have a common interest in improving recipient government
administrative systems as improved systems reduce the impact of
corruption. Governments and donors need to reconcile the conflict
between limited capacity and endemic corruption often found in partner
countries with the need for flexible budgetary support. The World Bank
has taken a useful initiative by supporting country assessments of
procurement and financial systems. If these procedures were shared more
widely, donors would have many more opportunities to explore collective
efforts to support systemic improvements in specific countries and
sectors.
At the country level, donors should cooperate to improve core
budgeting, financial management, accounting, and procurement and
auditing systems in partner governments. Donor co-financing or parallel
financing in these areas is important. As a minimum, donors need to
make sure individual projects and programs in these areas are comple-
mentary rather than competitive. The World Bank is developing a new
approach to address these issues in Uganda (see Box 5).
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
Increasing Donor Support for Developing Countries
Developing country governments have primary responsibility for
addressing corruption and therefore need more assistance with
operationalizing reform efforts. They should decide where to focus,
prioritize, and sequence their various reform strategies. World Bank
Governance toolkits and anti-corruption checklists, which have been
developed by several donors, can assist but they are unlikely to be
sufficient.
As a first step, donors should organize support at the country level
around the kind of collaborative arrangements previously proposed. In
support of this effort, development agencies could create an informal or
ad hoc working group on corruption. One of its main tasks would be to
prepare easily understandable and comprehensive practical guidelines on
the development and implementation of anti-corruption strategies and
action plans. The group would also have a mandate to systematically
review progress and lessons learned, which could be widely disseminated
and used to revise strategies and activities. The group could also pilot
new approaches.
Poorer countries have limited capacity to develop and implement
anti-corruption plans. Donors need to provide technical expertise and
Box 5: Improving Core Government Systems in Uganda
The government and the World Bank are developing a new public expenditure
reform program, which aims to improve service delivery. A key component is
improvement in core public sector systems. The program is expected to cover:
public procurement; incentives and pay reform; financial management; and
decentralized service delivery. This approach can potentially link existing and
planned support with other donors, which can contribute to the overall goal.
DFID and other bilateral donors are currently supporting public service reform
and strengthening the audit office. UNDP has supported efforts to strengthen
local government.
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other support in a more systematic way, potentially utilizing the following
three options, which are not mutually exclusive:
1. The United Kingdom (UK) plans to develop a resource center to
support its work on corruption and provide resources to develop-
ing countries, which could be developed on a larger scale with the
support of other interested donors. The UK is willing to discuss
this further as a possible Utstein donor group initiative or as a
wider donor exercise.
2. Regional development banks or other regional institutions could
assist developing countries in their efforts to address corruption.
Donors could provide financial support for regionally based
capacity in these institutions. The UK is exploring this option
with the Asian Development Bank.
3. The World Bank Institute and World Bank regional and country
programs are currently supporting corruption surveys and the
preparation of national plans in seven African countries and
Eastern Europe. Other donors could help finance extending these
programs to other regions and countries.
Promoting South-South Lesson Learning
Donors should collaborate with developing countries to produce mecha-
nisms that encourage sharing approaches and experiences; and promote
joint monitoring and peer review in assessing anti-corruption reform
progress. Donors need to investigate ways to stimulate this process.
Some African Governments are committed to adopting the Global
Coalition for Africa (GCA) principles on anti-corruption. DFID has
suggested that the GCA advocate a peer review process to monitor
progress with implementation—a process similar to the OECD DAC
review of member countries’ development assistance programs. Alterna-
tively, donors could promote a neighborhood watch by helping to
establish regionally based monitoring units or observatories, which could
complement national efforts to track progress in tackling corruption.
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Improving Coordination of Anti-Corruption Policies and Activities by Donor Agencies
Regional anti-corruption efforts could also be supported through
other fora. For example, the Asia-Europe Meeting created a forum, with
potential support from the UK and European communities, that focuses
on corruption issues between European and Asian countries.
Summary
Clearer and more intensive processes of collaboration between govern-
ment, civil society, and development agencies would make action against
corruption much more effective. Such processes could usefully cover
three areas (1) anti-corruption strategies for particular countries; (2)
action against corruption in the procurement of aid financed goods and
services; and (3) support for multilateral action to constrain corruption
and money laundering occurring outside developing and transitional
countries.
Collaboration on Anti-Corruption Strategies
Governments should develop anti-corruption strategies in consulta-
tion with their civil society and private sector as a basis for support by
development agencies. The preparation of Poverty Reduction Strate-
gies and Comprehensive Development frameworks provides an
opportunity to create comprehensive strategies; and we urge govern-
ments and the World Bank to ensure that these documents are pre-
pared on a collaborative basis and include specific proposals for action
against corruption. If strategies and programs for combating corrup-
tion can be prepared on this basis, development agencies should be
ready to pool their financial resources to support the implementation
of anti-corruption programs.
Development agencies could also work together to learn the lessons
of combating corruption; to develop new approaches; and to jointly
prepare and disseminate a toolkit to guide government strategies as well
as development agencies’ support. This could be maintained by sharing
access to technical expertise through a resource center.
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Clarke
Aid Procurement
Interest is growing for collective action to improve procurement systems
in developing and middle-income countries. The World Bank could take
a lead by sharing its country procurement assessments more widely and
using this as the foundation for a joint donor effort. Additionally,
methods should be created to “blacklist” firms suspected of malpractice
or corruption in procurement. If the World Bank is prepared to share
legally defensible evidence in such cases, other donors should be prepared
to blacklist the same firms.
Bribery and Money Laundering
Development agencies can provide technical support to the secretariats of
the OECD and the Council of Europe Conventions to improve the
monitoring and implementation of efforts to curb the bribery of foreign
public officials. These agencies should support the OECD Financial
Action Task Force’s attempts to establish regional networks against
money laundering. More generally, they should collectively play a larger
role in the OECD, the Council of Europe, and other fora to present a
development imperative for action that originates in developed countries.
South-South Learning and Peer Review
There is considerable potential for developing and middle-income
countries to share and learn from their experiences and to establish peer
review systems to monitor progress. Donors need to consider how they
can collectively support initiatives of this type.
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Improving Coordination of Anti-Corruption Policies and Activities by Donor AgenciesPS
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115
Opening Speech: Corruption Distorts Development Investments
Use of Data Collection,Statistics, andMonitoring Systems
117
Monitoring Corruption: An Outline of Selected Issues
Monitoring Corruption:An Outline of Selected Issues
Ugljesa Zvekic
THIS PAPER FOCUSES ON A few selected issues related to the monitoring of
corruption. It starts with the positioning of monitoring within the
cognitive/action process and focuses on levels, types, and purposes of
monitoring. A monitoring protocol for corruption assessment as
developed within the framework of the United Nations (UN) Global
Programme Against Corruption is presented.
The Positioning of Monitoring
Monitoring is just one of the elements in the cognitive/action process
related to corruption. It is a blend of cognition and action. Therefore, in
order to monitor corruption, a solid understanding is needed on issues
such as
• what is corruption (definition)
• types of corruption to be monitored (type)
• measurement (how) and frequency (how often)
• the temporal and spatial framework (location)
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Zvekic
• who is involved (actors)
• available knowledge (sources) about corruption
• public tolerance levels (cultural context)
• reaction: strategic, normative, institutional and operational
(response)
• purpose of monitoring such as recording, tracking, evaluation,
change inducement
• monitoring for whom: society at large, public institutions, donors
• use of monitoring: instrumental, empowerment, local/national,
comparative international
Just as there is no single phenomenon of corruption or response to
it, there is also no single monitoring mechanism.
Definitional Issues Related to Monitoring
Effective monitoring begins by identifying what is to be observed. There
are a number of definitions of corruption, and consequently, depending
upon the definition adopted, measurement, including the setting of
benchmarks as well as other properties of monitoring, varies. For
example, if one utilizes a strictly legal definition, then only acts subject to
the penal code are monitored, such as complaints cleared as corrupt acts,
offenders processed and charged, offenders sentenced, sentences passed
and sentences implemented. In this case, one is scrutinizing corruption
through the activities of criminal justice agencies in the same way
criminal justice statistics provide for the observation of those agencies’
activities that are related to any stipulated offense or groups of offenses.
Many criticisms have been outlined against such restricted definitions of
both corruption and monitoring. In contrast to the crime discourse, in
which victims’ surveys resulted from a long debate about the limits of
criminal justice statistics, the corruption discourse, generally discounts
official criminal justice accounts of it. While such an approach may be
well founded, comprehensive corruption monitoring at the societal level
should include criminal justice statistics on acts legally stipulated as
offenses. Often this point is too easily forgotten, which limits the ability to
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Monitoring Corruption: An Outline of Selected Issues
track the levels and types of corruption recognized by legislators and
defined by the laws of the country. Moreover, it does not provide for the
monitoring of criminal justice agencies’ performance when it comes to
investigation, prosecution, and sentencing of questionable practices.
However, from a comparative international perspective, such an approach
faces a number of challenges as is the case with other international
comparisons of crime.
There is also the issue of the cultural definition of corruption. Some
assert that what is considered abuse in a particular cultural and/or legal
context is not necessarily considered corruption in other contexts. In such
cases, monitoring becomes even more complicated both within a
particular context as well as from an international comparative perspec-
tive. Does corruption include, for example, tipping, or culturally expected
nepotism, or politician’s favoritism of his/her constituency’s interests?
What if these are not considered corruption by the general population
but are unacceptable by the legal system? Whose considerations define
corruption? To add to the complexity of the definition are changes in the
cultural aspects of corruption over time or by different segments of
society. A careful examination of the intricacies and influences of culture
is crucial for the development of a feasible anti-corruption strategy.
However, the methods and purposes of surveying abuse based on cultural
definitions and the evolution of those definitions is quite different from
monitoring corruption as defined by criminal law.
Levels and Types of Corruption
A similar discourse relates to monitoring types and levels of corruption.
Many distinctions are made such as administrative versus political; public
sector versus private sector; routine or so-called street level versus top
level; systemic versus episodic. Observing these types and levels of
corruption depends, again, on the definitions of the phenomenon under
consideration. Usually, it is defined as a very loose combination of
institutional sectors and actors; or an observed or hypothesized fre-
quency; or the degree of penetration of corrupt practices within a society
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Zvekic
or one of its sectors. Such differences call for various monitoring methods
ranging from systematic surveys through systematic n-case studies to
systematized and focused anecdotal information. Advantages and
disadvantages of these methods and systems merit special consideration
but such a discussion is not within the scope of this paper.
Measurement and Monitoring:
The Phenomenon and the Response
Most of the attempts to measure and monitor corruption by a variety of
approaches and techniques have to-date focused on the phenomenon of
abuse. Thus, many focus groups, mass media analyses, and surveys
examine the perceptions of and/or experiences with corruption by
general populations, the business sector, and public administration
officials. Some methods, especially surveys and focus groups, face serious
challenges as to their capacity to provide systematic monitoring due to,
for example, possible differentials in actual samples between various
surveys, or differences in the actual composition of focus groups con-
ducted in different time periods. Whatever their merits and shortcom-
ings, all of them concentrated, although with different methods, on
measuring and providing the basis for observing the perceived, or actual
levels or types of corruption. This has resulted in two types of biases.
First, only the phenomenon was dealt with without paying very much
attention to responses. Second, both the perceptions of and actual
experiences with corruption are influenced by those responses. Therefore,
a comprehensive measurement and monitoring of corruption must
equally deal with the phenomenon, levels, and types, as well as with the
responses. In turn, the response category includes political strategy,
normative and institutional framework, and operations of the institu-
tions. Furthermore, it includes levels of tolerance and activities of an
organized civil society. It is worth noting, an passant, that political
criticisms of some of the international measures of corruption such as the
Transparency International (TI) Perception Index or the United Nations
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Monitoring Corruption: An Outline of Selected Issues
International Crime Victim Survey rests very much on their respective
neglect of the response-to-corruption dimension.
Measurement and, in particular, monitoring of corruption must
examine the interaction between the phenomenon and its dynamics, and
equally important, the responses to corruption. The two are related and
monitoring is inadequate if both are not included.
Monitoring Corruption: Why and Where
Three issues regarding the monitoring of corruption merit special
attention, its purpose, use, and the jurisdictional and spatial coverage.
The methods and level of precision depend heavily upon its jurisdictional
and spatial coverage. Here are two examples.
A number of countries have established anti-corruption bodies or
specialized institutions to deal with corruption. Obviously, their jurisdic-
tions and mandates differ. There are parliamentary anti-corruption
commissions; highly focused anti-corruption internal oversight units
established within a particular public administration such as police anti-
corruption units or disciplinary bodies in private enterprise; and units
specialized in corruption investigation and prosecution. Moreover, some
agencies have jurisdiction over the entire national territory while others
have a more limited jurisdiction such as a region or state within a federal
constitutional system. In some countries, commissions have broad
mandates covering strategy, prevention, education, investigation, and
prosecution and others have anti-corruption agencies that utilize
exclusively the criminal justice, or the civil litigation approach. The
broader the jurisdiction and spatial coverage of an anti-corruption
institution the more complicated its monitoring. If a commission has a
broad societal jurisdiction and covers the entire national territory then its
evaluation analysis covers a wide range of areas. By contrast, if the
mandate and jurisdiction of an agency is more restricted, then the
monitoring might be limited to its performance and the level of client
confidentiality. A more complicated situation is when there are a number
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Zvekic
of agencies involved in the prevention and control of corruption with
very loose coordination. In such a case, monitoring should target
different agencies and provide information for overall coordination.
A second example involves the overall responses to corruption at a
societal level. The purpose and use of monitoring play an important role.
The TI Corruption Perception Index, the most well known international
instrument, is a composite index of a number of surveys (seventeen from
ten independent institutions) covering nearly 100 countries. Despite
numerous criticisms, it provides moderately reliable information as to the
levels of corruption from an international comparative perspective. Its
main purpose is to provide a standard measure of perceptions and incite
public awareness. Although its intention was not to devise precise league
tables, it has a certain “shaming” effect on the international community.
However, it is not a monitoring tool or source of information related to
response-to-corruption. In that sense, it shares the bias of many other
national or local corruption measurements. Yet, its practice of scoring
members of the international community has stimulated national debates
around the problem of corruption, particularly in those countries that
rank near the top of the TI index.
One criticism of international surveys is that they are constructed
externally and used for external purposes. Obviously, all international
surveys do not warrant such reproach. The UN International Crime
Victim Survey was developed by a group of international experts that
included specialists from participating countries. However, the question
of ownership in production and use is critical. It is fundamentally
important that the primary purpose for monitoring corruption and its
societal responses is for local use. Even monitoring methods can have an
important added value. Utilizing these methods yield benefits not only
from being produced by local experts, with international assistance where
necessary, but they also facilitate broader public participation in the
monitoring process. Greater participation increases public empower-
ment, which is important for at least two reasons. First, public adminis-
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Monitoring Corruption: An Outline of Selected Issues
tration accountability, and second, victims as well as the “reluctant
offenders” and/or active actors/willing participants are involved in the
anti-corruption process. Action-planning and coalition-building work-
shops linked to surveys conducted under the auspices of the World Bank
Institute provide good examples of such monitoring/empowerment
exercises. Standardized monitoring procedures demonstrate international
comparisons ensuring participants are measured under similar condi-
tions. Furthermore, it may be useful for monitoring international
instruments such as conventions.
Concluding Remarks
It should be readily recognized that much of the discourse on corruption
and measurement does not reflect global economic interests. It also does
not reflect differences nor does it provide for a more comprehensive
understanding of corruption. Most of the discourse and measurement
focused on perceived or experienced corruption in public administration.
It neither took into account different levels and types of corruption nor
efforts undertaken by governments, civil society, donors, and interna-
tional organizations to prevent and curb corruption. In a certain sense,
the current discourse on corruption resembles the old-fashioned crime
discourse. Crime was viewed in isolation, without consideration for
reactions from the criminal justice system and the public. There is an
imperative to position corruption within the power structure and provide
comprehensive instruments for evaluation and participatory monitoring.
It is important for donors to provide solid support for establishing
reliable and standardized monitoring mechanisms whether on a broad
societal level or for specific sectors and institutional responses if they
want to assist in the prevention and reduction of corruption. Addition-
ally, they must create an enabling environment for local ownership of
these mechanisms’ production and use. They must be instrumental as
well as participatory.
127
Institutional Approaches to Combat Corruption
Institutional Approaches toCombat Corruption:Suggestions from BilateralTechnical Cooperation1
Albrecht Stockmayer
“In a partnership, development cooperation does not try to do things
for developing countries and their people, but with them.”
—OECD, Shaping the 21st Century:
The Contribution of Development Cooperation, May 13, 1996
Approaches to Combat Corruption
There is little disagreement when it comes to the design of appropriate
approaches to fight corruption. Individual people can be corrupt and
some organizations and types of transactions may be specifically prone or
vulnerable to corruption and bribery. But generally, corruption has to be
considered a quality of the country’s political and administrative systems.
Few would contest the lesson that institutional approaches are necessary
in order to come up with even limited success in the fight against
corruption. These approaches should be an integral part of Comprehen-
sive Development Frameworks (CDF) and more recently Poverty
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Stockmayer
Reduction Strategy Papers (PRSP).2 And they should target institutional
capacity development (I/CD) and its determinants, in general, rather than
the behavior of individuals and organizations.
We do not need to start from scratch for the contents of approaches
to fight against corruption. We can usefully link with the activities and
results achieved in two areas: Participatory Development/Good Govern-
ment (PD/GG)3 and I/CD.4 We need to select policy areas that promise
some short-term results, impacts that can create additional dynamics in
the fight against corruption, and actors that have access to social capital.
In doing so, we may streamline today’s programs that often resemble a
shopping list.
And finally we need to examine our instruments, one by one, and
determine whether they are relevant and effective given the complex
environment in which they are applied. Supporting the fight against
corruption presents another opportunity to develop and focus the
instruments of bilateral technical cooperation in the area of I/CD. Some
of these instruments are known and thoroughly discussed as part of the
debate on I/CD. But compared to approaches that have been made the
subject of discussions, we know little about the usefulness of instruments.
Likewise, the question of how these instruments should be applied within
the context of the combat against corruption has been given little
attention. Corruption has for a long time been a part of the daily business
of technical cooperation (TC) with bilateral donors. Together with their
partners, they have been faced with the nature and dimension of corrup-
tion on every step of the cooperation process. And they have had to
account to their constituency for the negative impact of corruption on
development activity. Yet, the most recent discussions in development
cooperation circles have focused on concepts that are ambiguous at best
and do not relate to the realities of institutional reforms. (See Box 1.)
Concepts and approaches are still not very convincing and the
question of instruments remains to be dealt with satisfactorily. Neverthe-
less, today’s situation presents big advances. Thanks to the determined
efforts of Transparency International and some of its national chapters,6
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Institutional Approaches to Combat Corruption
an atmosphere has developed that lends itself much better to the fight
against corruption. A global consensus has emerged that helps those that
are working against corruption in a national environment to gain
legitimacy. Without its support, local efforts would have been left alone
and, thus, ineffective or subject to the critique of those groups that have
accommodated corruption. The many ongoing initiatives to change the
perception of corruption include
• making corruption difficult on the giver’s side;
• accepting the fight against corruption in the North as a condition
to request good governance in partner countries;
• giving the request for good governance international credibility;
• involving private sector and civil society in improving governance;
• promoting better division of labor and cooperation among the
development agencies.
These differences have prepared the terrain for action that is more
determined and created a public with high expectations that may not
condone any further lack of success.
The following discussion intends to analyze the profile of bilateral
technical cooperation, its approaches, and instruments by contrasting it
with parallel developments of multilateral cooperation practices. It is
Box 1: Comprehensive Approaches: Ownership and Capacity
These approaches present rather far-reaching and complex tasks for every
government agency. If recipient governments cannot make them their own, the
nature and size of these activities have a decidedly neo-colonial character. The
World Bank has, therefore, strongly advocated more ownership of these pro-
grams by recipient countries.
However, the public discourse, led by the World Bank, has skipped the topic
of capacity and instruments that are needed to turn these ambitious programs
into a local reality.5 It is this area where technical cooperation agencies with their
hands-on experience in institutional development and capacity building will
have to pursue their comparative advantage.
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Stockmayer
based on experiences gathered in relevant governance and institutional
development programs and projects where German technical cooperation
has contributed, mostly in close cooperation with other bilateral or
multilateral donors.
Roots and Strengths of Bilateral Cooperation
Its origin and the successive mandates that have been formulated by
parliament and the executive characterize bilateral technical cooperation.
These mandates have become more explicit over time and have under-
gone decisive changes after the demise of the Soviet Empire. More
recently, globalization has had an important impact as national govern-
ments in the South that are losing their hold on policy matters seek to
find new roles in a global order that is only gradually beginning to take
shape. We are asked to contribute to qualitative elements of a global order
as well as to develop instruments, which support emerging structures and
processes that can assist countries in determining their place and role.7
Roots
Five points stand out when distinguishing bilateral from multilateral
cooperation:
1. Bilateral development cooperation is an expression of the desire
to establish a new set of relations between people and their
organizations of the North and the South and to help them
become responsible actors in today’s new global order.
2. Bilateral cooperation at all times is subject to close public
scrutiny; parliaments and an active development community
including community service organizations (CSOs) and non-
governmental organizations (NGOs) have closely monitored and
influenced its principles and patterns of activities. Government
has to acknowledge these actors who, at times, pursue indepen-
dent and partly competing policies.
3. As its activities are always accompanied by public attention, public
relations always has to be an integral part of bilateral activities.
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Institutional Approaches to Combat Corruption
4. Bilateral projects have to include a special effort to involve the
public in its activities, not only the private sector but also
academia, churches, trade unions, and civic associations; and it
has to accommodate these organizations’ objectives and patterns
of activity in its business plans.
5. Finally, as far as the public sector is concerned, bilateral coopera-
tion has direct and immediate access to specialized competence.
Skills and public sector experiences are available to bilateral
cooperation on a privileged basis in the pursuit of its policy aims.
Opportunities for Bilateral Cooperation
These features lead to a number of well-defined opportunities for
bilateral cooperation and public agencies. The public origin of its raison
d’être and its embeddedness in political and societal developments
forced organizations responsible for official bilateral cooperation to
always reflect a broad spectrum of political and societal interests. Great
numbers of partnerships established by private and public actors in the
North and the South that have involved communities and people from
all walks of life, drive this inclusive approach. Moreover, bilateral
cooperation is open to political and societal trends as they develop.
Public organizations had to respond to these trends. At the same time,
they were able to absorb them in due course based on their knowledge
of the nature and dimension of these trends. Environmental concerns,
the attention to gender issues, and poverty orientation of development
cooperation, all were accommodated as a matter of routine into the
bilateral development mainstream.
Linking with rather broad-based public efforts has brought a large
number of professional and issue-orientated organizations within reach
of development cooperation by supporting bilateral cooperation and, in
turn, providing it with their sense of direction, resources, and compe-
tence. Bilateral cooperation, thus, avoided succumbing to passing
fashions, which characterize the multilateral cooperation scene. Pro-
nounced movements, such as moving from the public to the private
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sector and back to the state within ten years, will not be acceptable to and
condoned by a broad-based and multi-actor cooperation network. On
the other hand, principles and patterns essential for this type of coopera-
tion, among them long-term institutional cooperation, have enjoyed
continued emphasis and support.
Being under continuous and, at times, painful pressure to account to
the taxpayer and their representatives in parliament and the media,
bilateral cooperation could never escape being identified with the positive
and negative result of its partnerships, despite its specific contributions.
At home and abroad, it had to accept part of the blame and the responsi-
bility for undertakings that went wrong or for partners and their behav-
ior, which did not meet the interested public’s expectations. From this
vantagepoint, development has always fundamentally been conceived as a
joint venture between two active partners, with bilateral organizations
expected and having the obligation to carry a requisite share of the
responsibility and the blame.
These features were largely responsible for most of the support for
development cooperation in our respective countries. However, the
support has been gradually diminishing and public attention to the
formal decision making fora, often, has all but vanished. Continued
public support may depend on the handling of the corruption issue, an
issue of universal interest.
INSTITUTIONAL/CAPACITY DEVELOPMENT AND CORRUPTION. Combating
corruption is an area of bilateral cooperation where institutional/capacity
development approaches can make a unique contribution. I/CD creates a
single focus for the analysis and discussion of reform options. Technical
cooperation actors command the experience and the techniques to act as
catalysts to pursue these options even in an environment that is either
unprepared or even hostile to reform. Combating corruption can be
understood as an ultimate challenge to bilateral technical cooperation.
Based on participatory development processes with donors and their
agents in a facilitating role, it can fulfill its task if and to the extent it can
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Institutional Approaches to Combat Corruption
• initiate and manage reforms in many subject areas that are
entering the scene in a very rapid sequence;
• help bridge capacity shortages for reform and get reforms under
way;
• conceive and propose new reform strategies that open new avenues
and do not follow old divisions of labor between market and state,
public and private sectors, state and local authorities, service
providers and their consumers, and policy dialogue and technical
cooperation;
• foster commitment to change released by the democratic process,
social market reform, or newly autonomous decentralized
governments;
• sustain change; and
• identify and mobilize reform actors, form coalitions and assist
them in orchestrating reform drives.
Obviously, these activities presuppose a very thorough and profound
knowledge of the local political scene and institutions. Thus, activities of
this nature are outside the scope of organizations that base their precepts
mainly on sector expert knowledge without being closely connected to
local political and institutional development processes, its fora, and
actors.8 Bilateral technical cooperation if it is to function effectively, here,
has to ensure its capacity and availability to consider playing an active, yet
clearly defined role in national developments. One precondition is
decentralized and participatory decision making. The other is a clear and
credible mandate, transparent behavior, and most important the capabil-
ity to integrate human and financial resources into local developments.
(See Box 2.)
The capabilities of bilateral technical cooperation have been ob-
served in many cases and instances. Bilaterals had to accept these chal-
lenges. In any given situation, they had to seek common methods and
procedures to find a way to move forward. Overtime, a locally based
common standpoint on approaches, and activities resulted. At times,
spurred by their juxtaposition to a multilateral position.
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Not all donors acknowledge that they pursue this direction. And not
all have the means and the instruments that allow them to take an active
stand locally, for example, instructing and directing their staff or contrac-
tors to test certain options and follow certain practices. On the other
hand, some of the lessons developed by common practice were not
aligned with the current rationale on development and, consequently,
have not been noticed:
• First, technical cooperation practices in soft and complex areas
such as corruption drive home the fact that technical cooperation
and institution/capacity building respectively have long ceased to
be endeavours that can be planned, executed, monitored, and
evaluated using some generally agreed standards that originate in
and are mostly derived from the practices of hard lending opera-
tions.
• Second, if technical cooperation can transport values and, thus,
have a political background, then some cherished principles of
development cooperation have to be adjusted. The active pursuit
of change in the social and political arenas has a bearing on the
principle that a preexisting commitment to and, therefore,
conscious ownership of reforms are preconditions for interna-
Box 2: Endemic Corruption and Technical Cooperation
It is unreasonable to expect a government to come up with instruments,
strategies, and action plans that have been proven technically reliable if
• public office is bought and sold to private individuals, parties or interest
groups;
• autonomous transactions are a foreign concept simply because there is no
difference between the private and public spheres; and
• international lending and business live happily side by side with these
conditions because deal-making commands a premium and long-term
development impacts are relegated to the back burner.
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Institutional Approaches to Combat Corruption
tional and bilateral cooperation. In a reform environment,
technical cooperation is engaged in all steps of the reform process,
including its design and the coalition building that is necessary to
get the requisite support for reforms. Consequently, technical
cooperation needs to be an active element not only when projects
or programs are approved and organized but also when civil
society identifies, initiates, and implements reforms.
• Third, in order to pursue technical cooperation of this nature one
needs a professional background. The set of professional skills and
experience needed to do a satisfactory job in this area can only be
acquired by exposure to social and political processes. By utilizing
participatory instruments, advisors ensure that legitimate interests
are not ignored, that accountability does not end at the doorsteps
of cooperation, and both can contribute to efficient outcomes.9
Direct Execution: An Appropriate Option
Technical cooperation presents opportunities through the specific
management of its projects. These specifics have been developed over
time by permanent feed back from its daily practices and by long and, at
times, very tough discussions on its relative merits and contributions to
institutional development. They present an added value especially if
compared to the instruments of sector and program lending. Two traits
of technical cooperation and its instruments are particularly relevant to
the fight against corruption. One is the ability of technical cooperation
to manage, direct, and account for expenditures utilizing standards
outside the recipient organization. The other is the possibility of
targeting resources to those groups and interests, regardless of their
domestic affiliations, that offer the highest chances of success in the
fight against corruption.
Donors are increasingly questioned at home whether their money is
spent wisely. Since measuring project success and performance is difficult
and even more difficult for the general public to understand and accept,
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evaluation is gauged by how recipient countries account for expenditures.
Donors that do not tie aid to the application of their domestic standards
of accounting and auditing need to show that satisfactory regulations
exist in the recipient countries. In those countries where corruption is
endemic, it is, however, exceedingly difficult for them to demonstrate that
their national criteria is in place, reasonable, and applied consistently.
Elliot Berg noted long before corruption became the prominent issue of
international concern
. . . despite agreements in principle voiced at international meetings,
many donors are reluctant to hand over extensive technical coopera-
tion management authority to recipient governments. Donors doubt
that adequate capacity exists in many cases. They worry about
corruption. They fear loss of control over their programs and
priorities, much of which is imposed by their headquarters and their
national legislatures.10
Bilateral technical cooperation agencies have always been carefully
scrutinized as far as their management of taxpayers’ money was con-
cerned. They always had to strike a balance between institutional develop-
ment strategies that were effective and sustainable in the long run and
national standards of expenditure management or policy and program
evaluation that were liable to interfere in the short run with these
strategies. The balance has become even more critical as pressure has
mounted on both ends. A less buoyant flow of funds and programs,
which are more complex, has placed additional stress on technical
cooperation systems. The heightened awareness of corruption in both
developing and industrial countries has added the necessity to deal with
these problems as they arise. (See Box 3.)
But the specific role bilateral technical cooperation plays in
fighting corruption cannot be reduced to playing the gatekeeper for
donor funds and programs in general. While it has to ensure that
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Institutional Approaches to Combat Corruption
standards are met, technical cooperation, at the same time, can only
assist those organizations in design and, more important, in the
implementation of effective institutional development strategies.
Because dedicated personnel with its own mandate and, therefore,
evaluation criteria perform technical cooperation services, it is
possible to work even in those countries where general framework
conditions are hostile to fighting corruption. Services and resources
may be directed to areas and actors that may not be in the main-
stream. They may not act in accordance with prevailing governmental
ideology and policies yet they may have the potential to fight corrup-
tion. Critical instruments and practices that have been developed to
perform this task will be shown below.
Box 3: Comprehensive Approaches—Capacity Bottlenecks
In many countries, today’s public sector institutions are in no position to make
decisive contributions to reform. Over the last decade, reform programs that
bore no relation to public sector management capacity or their ability to handle
political challenges have significantly diminished these institutions, which were,
inter alia, expected to:
• privatize and establish sound regulation practices and create an enabling
environment for new commercial players;
• create enabling environments for communities making them autonomous
and self-sufficient; and
• ensure a cohesive framework that increases the exchanges between
hitherto unrelated administrative or economic spheres.
They were to facilitate these changes without adequate skills and informa-
tion, weak enforcement capacity, and the danger of regulatory capture. The
well-known result of this overload was either a static administration that slipped
into some sort of coma or corruption and other negative behavior that demon-
strated the decay and disintegration of institutions. It is these institutions that are
now called on to develop integrity systems and manage programs that far
exceed past approaches in terms of dimension and complexity.
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Special Technical Cooperation
In the course of its work, I/CD as part of German TC has developed a
number of features. They are considered standard practice—techniques
and instruments that are essential ingredients of the institutional
development menu. They have a special bearing on the type of programs
that have emerged, over the last years, aimed at improving the integrity of
national governance systems. Those specifically important to combating
corruption are, inter alia:
• Process consulting as opposed to advisory services geared towards
reaching a predetermined result has been high on our agenda for a
long time. While it may be considered standard routine, it has been
necessary from time to time to introduce result-oriented elements
into advisory activities to respond to outside pressure on our
partner institution. In fact, a sound mixture of process support/
process consulting appears to be called for as they can complement
each other.
• In many instances, we have pursued open evolutionary approaches
particularly in policy fields, or with institutions that have not been
comprehensively analyzed, or have not found their task and role in
a given environment. A precondition for success is to refrain from
pursuing standard programs in cases where corruption-fighting
issues have not gained a reputation among the peer community or
have not developed sufficient political weight. Technical coopera-
tion activities permit partner organizations to experiment without
necessarily identifying themselves with the nature and result of
these activities and, if warranted, to withdraw from some, or all, of
the project.
• Process consulting as well as experimenting with certain ap-
proaches creates an environment where bilateral technical coop-
eration, as an external actor, can temporarily accept some of the
responsibility of a local institution. This exception, of course,
requires a well-structured context. It may take place only to the
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Institutional Approaches to Combat Corruption
extent cooperative action is predictable, its actors accountable, and
the values and objectives that are pursued and applied to situations
are open to evaluation and documentation. This is comparatively
easy for bilateral donors that can point to their home environment
for the values and practices that are executed within the framework
of project or program activities. Still, change has to come from
within the institutions. TC can only act temporarily.
• Technical cooperation can transfer or develop instruments and
methods of organizational and political reform management
that otherwise cannot be developed because of cost or opportu-
nity considerations. Each operation has to coordinate its
specific division of labor between bilateral technical coopera-
tion and the reform administration, and a gradual consolida-
tion strategy. The frequent argument that technical cooperation
prevents local institutions from developing their own expertise
does not apply here.
• The aim of bilateral technical cooperation is sustainability of
capacity development. It is, therefore, dependent on political will
operating not only at the top but also in concert with the
commitment at the center of institutions or coalitions that are
key actors in the reform process. TC activities regard both
political commitments and coalitions as intermediary results of
the reform process as they have to grow during the course of
change. To consider commitment on the partner side as some-
thing that will develop rather than as a preexisting condition
presupposes an external mandate for the initial phases of reform.
This mandate is included in the overall directive for technical
cooperation personnel that is always subject to two hierarchies.
The partner side is necessary to achieve the objectives of the
partner institution, and the donor side provides the needed space
and limited freedom to act as a catalyst in an initially unclear and
even potentially conflictive environment.
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• Technical cooperation can and is expected to transport certain
values openly. Both the partner and the donor often recognize
these values on a high level of abstraction. But in the case of
bilateral technical cooperation they are more transparent. Because
these values are applied within the national context of the donor,
the partner may get a much better understanding of their nature
and effect. There is no need for bilateral cooperation to resort to
the, somewhat peculiar, detour to convert values into developmen-
tal goods, such as requiring human rights protection as a necessary
element in strategies of successful economic development.
• Technical cooperation is designed to support reform processes. At
the same time, it is dependent on the development of this process
for its results. It is, therefore, more likely to envisage support
periods that can react to the dynamics of the institution and its
changes. The nature and the duration of the contribution may be
determined as the reform process unfolds.
• If some of these principles are applied, bilateral technical cooperation
is particularly suited to contribute to joint learning. First, because it
Box 4: Three Criteria for TC Programs Designed to Reduce Corruption
Inclusiveness:
Open for participation and complementary action.
Coherence:
Positively coordinated with other reform items, such as autonomy, results
orientation, privatization, and commercialization.
Institutional Dynamics:
Institutions have to decide that the fight against corruption is a development
objective. Corruption fighting must be an incentive for senior staff and it must
improve the standing of the organization vis-à-vis its clients and partners.
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Institutional Approaches to Combat Corruption
shares responsibility for the reform exercise, and second, it pursues
this exercise in a clearly discernible role and with well defined tasks.
For the TC advisor, reform success or failure may have direct and
immediate consequences in the form of not only affecting the ability
to obtain certain funds but also impacting whether the advisor can
procure supplementary budgets as events necessitate. (See Box 4.)
• The main distinguishing feature appears to be that directly
executed technical cooperation can operate when structural
reforms have outlived their appeal and usefulness, or they are too
global and too general to help decision making in a given situa-
tion—conditions that abound in day to day reform management.
Joint Utstein Action
There are three areas where joint bilateral action could make a difference,
procedures and instruments, coordination, and common approaches.
Procedures and Instruments
• Harmonize policies and procedures for planning, disbursing,
monitoring, and evaluating development cooperation so that these
policies and procedures are more aligned with national practices
that, in turn, utilize accepted international standards of accounting
and auditing.
• Jointly develop strategies that focus on instruments and opportu-
nities for institutional reform based on the Utstein Partners
various types of national experiences.
• Foster coalition building to tackle the systemic problems of
corruption.
• Decentralize managerial and professional resources, thereby,
increasing the chance of detecting opportunities for reform action.
• Improve flexibility for bilateral cooperation procedures as a rule
rather than as the exception, thereby, accelerating the process that
allows for rapid responses to emerging opportunities.
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Joint action should highlight the comparative advantages of donors’
national experiences and instruments while, at the same time, improving
transparency of their objectives for actors in developing countries.
Coordination
Positive coordination should emphasize opportunities for (1) joint
flexible programs, (2) joint development of instruments and pro-
cesses, and (3) promoting ownership by a plurality of local actors.
Joint action should counteract the pernicious effects of the lack of
coordination, including
• confronting the partner with an array of decisions, each of which
may be rational taken separately, but which add up to an irrational
whole;
• disregarding longer term results by focusing on short-time
horizons and pressure to deliver inputs; and
• using “gatekeepers” in order to ensure quality control and proper
use of resources instead of strengthening common acceptable
accounting and reporting standards.
Common Approaches
Coordinated action has to rest on common approaches in priority areas.
These areas and approaches include, for example, creating windows of
opportunities or actions in the field of PD/GG and fora for commitment
and dialogue; providing an inclusive setting for negotiations; and
developing coherent policies based on the harmonious behavior of
representatives. And finally, it is important to create an enabling environ-
ment for political and institutional processes to take place.
Connecting civil society associations and creating a political space
for their exchanges is a vast and still uncharted terrain for technical
cooperation. Whether it can be successful will depend very much on the
success we have in connecting the many instances where this has hap-
pened, albeit in a small way, to a larger environment. And it will depend
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Institutional Approaches to Combat Corruption
on the type of experience, taken from a variety of national backgrounds
that can be brought to bear on these developments.
Notes
1. The author has greatly benefited from discussion with Hansjöbrg
Elshorst, Managing Director, Transparency International, based on
his paper, “How Corruption Can be Combated through Develop-
ment Cooperation.”
2. Abbreviations for National Strategy for Sustainable Development,
Comprehensive Development Framework and Poverty Reduction
Strategy Paper.
3. See for the final report of the working party on PD/GG http://
www.oecd.org/dac/htm/pubs/p-pdgg.htm
4. See for developments the capacity.org website of ECDPM and the I/
CN informal network website http://www.oecd.org/dac/TCNET/
index.htm maintained by OECD/DAC.
5. The “financial products” of the World Bank recently have been
modified to include adaptable forms of lending, which allow for
more local ownership and better accommodation of changes in
framework conditions. The Adaptable Program Loan (APL) was
approved only in late 1997. APLs are supposed to provide, through a
series of loans, phased and sustained support for the implementa-
tion of a long-term development program that reflects economic
priorities and contributes to poverty reduction. One of the first
occasions for an APL was the Programa de Reforma Institucional in
Bolivia, which is also a pilot country for the Comprehensive
Development Framework.
6. See inter alia Bangla Desh Pierre Landell-Mills, “Mobilising Civil
Society to Fight Corruption in Bangla Desh,” PREM Note no. 30,
October 1999.
7. “Wir Industrieländer tragen mit der Ausgestaltung der entstehenden
globalen Ordnung für die darin lebenden Menschen eine ungeheure
144
Stockmayer
Verantwortung. Diese Verantwortung für die Gesamtheit begründet
die Notwendigkeit der Strukturpolitik in globalem Maßstab, die—
analog zur nationalen Ebene—die Aufgabe hat, in internationale
Ordnungs- und Prozesspolitik qualitative Steuerungsinstrumente
einzubauen und mit einem eigenen Instrumentarium zur
Verbesserung der Strukturen beizutragen. Diese Aufgabe muss
Entwicklungspolitik verstärkt übernehmen.” Heidemarie
Wieczorek-Zeul, in Nord-Süd Info Dienst, November 1999 .(As
industrial countries, we carry a heavy responsibility in designing an
emerging global order for the people that have to live in it. This
responsibility for the global whole is the reason for pursuing
structural policy on a global scale. It has the task, analogous to the
national level, to introduce qualitative elements into international
policies relating to structures and processes as well as to contribute
to their improvement by using their own instruments. Development
policy increasingly has to pursue this task (Translation provided by
the author.)
8. Cf. Joseph Stiglitz, Participation and Development: Perspectives from
the Comprehensive Development Paradigm, Seoul, Korea, 27 February
1999, (http://www.world bank.org/html/extdr/extme/js-022799/
index.htm)
9. Skills and experiences needed to do a satisfactory job in this area
have always been in demand. It is indeed “difficult for a foreign
expert to become effectively involved in the politics of change in a
developing country.” This opinion was expressed by the Chairman
of the Committee of the Whole of the World Bank Board as far
back as 1989 when he commented on the less than positive results
of “Free-Standing Technical Assistance for Institutional Develop-
ment in Sub-Saharan Africa.” And for a considerable period, this
opinion has prevented technical cooperation to build a corps of
professionals that could justifiably claim to analyze and under-
stand the issues at stake.
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Institutional Approaches to Combat Corruption
10. Elliot Berg, Rethinking Technical Cooperation: Reform for Capacity
Building in Africa, New York: UNDP/DAI 1993, 257
References
Batley, R. 1999. “The Role of Governments in Adjusting Economies”
International Development Department, Paper 41. University of
Birmingham.
Beier, C., and A. Stockmayer. 1999. “Schuster bleib bei deinem Leisten”
Welt Trends. November
Berg, E. 1993. Rethinking Technical Cooperation: Reform for Capacity
Building in Africa, New York: UNDP/DAI
Lamb, G. 1987. “Managing Economic Policy Change, Institutional
Dimensions,” World Bank Discussion Paper 14.Washington, D.C.:
The World Bank.
OECD/DAC. 1996. Shaping the 21st Century: The Contribution of
Development Cooperation. Paris: Doc. DCD/DAC (96) 15.
—————. 1997. Final report of the ad hoc working group on partici-
patory development and good governance, part 1 and part 2
(Lessons from experiences in selected areas of support), Paris
OECD 1997.
147
Kabinja: A Case Study
Kabinja: A Case Study
Patrick Conway and Rick Stapenhurst
Background
Mettie Clarkson is a regular at the Kibanda Hilton. “No,” she thought. She
doesn’t live in her hotel room. It just seems that way. She is thankful for
the small benefits of becoming well known at the Hilton. She always is
given the same luxurious room facing the riverfront. While it has cost her
a few judiciously chosen presents to the concierge, she has considered
them an investment with high returns.
Investments are her business, after all, as senior program officer for
the USE-AID (the United States of Europe Agency for International
Development). The USE-AID is a major bilateral donor, which provides
long-term developmental grants and loans to developing countries’
governments and NGOs. Kibanda is the capital city of Kabinja, a small
landlocked developing country on the continent of Atlantis. USE-AID
has been a frequent donor to the Kabinja government over the past few
years and Mettie has developed a strong personal, yet professional,
rapport with its charismatic Prime Minister, Jeremy Masterson.
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Conway and Stapenhurst
This most recent stay at the Kibanda Hilton differs from previous
sojourns. Kabinja has been a favorite client of USE-AID, in part, because
the expected developmental impact has been quite high on its appraised
projects. Mettie has personally presented several of the projects to the
Board of Executors, and received high marks for her thorough planning
and the impact of her strong development forecast. Unfortunately, the
payoffs for these investments, both monetarily and in improved standards
of living, have always been substantially below their projections. The
Board of Executors, aware of these shortfalls, is concerned about rumors
of corruption in the Masterson Administration. This time, she is not
appraising a new project but investigating the importance of these
allegations. She has been asked to report to the Board on her findings
within a fortnight. Her report must include recommendations for
changes, if any, in the USE-AID programming policy toward Kabinja. The
Board has favored, recently, incentive-based lending strategies. If she finds
that policy changes are necessary, she will present a sequencing of
institutional and policy reforms along with increases in lending, triggered
by each reform.
The Economy
Kabinja is a landlocked country on the continent of Atlantis. Yagundaw
borders it to the north and east, and Xandar to the south and west. Its
total land area is 250,000 square kilometers with a population of fifteen
million. It is moderately endowed with minerals and fossil fuels; it has
rich soils, favorable for agriculture. Agriculture is the mainstay of the
economy although mining is also important. Industry and services are
growing in their respective shares of total product. The gross domestic
product per capita is rather low at US$500.
Public investment has been the engine for economic growth in
Kabinja and cotton, the fuel. Kabinja’s soils are well suited to produce a
superior quality of cotton, which traditionally has been the country’s
primary export. Two state corporations were created nearly twenty years
ago to manage the production and marketing of this cotton.
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Kabinja: A Case Study
The Irrigated Cotton Agency (ICA) bought a large parcel of the most
fertile land in Kabinja and invested heavily in irrigation facilities and
other improvements. Plots of land were then leased to sharecroppers for
the exclusive cultivation of cotton. This strategy has been profitable for
the sharecroppers, resulting in a substantial waiting list of farmers vying
for the right to cultivate a plot of the agency’s land. This surprises
agricultural experts from international donor agencies since the ICA has
never remitted any of the profits to the state budget.
The Cotton Marketing Board (CMB) was formed to purchase the
country’s cotton crop and sell it on the world market. ICA and its
sharecroppers are the major suppliers but private farmers also are
required to sell their product through the CMB. The difference between
the price paid to farmers and the price obtained on the world market is
used to cover the CMB’s administrative, transportation, and management
expenses. These expenses have been quite high recently, leading to a 20
percent wedge between supplier and world market prices.
The general manager position at both these corporations has become
among the most coveted jobs in Kabinja. The political infighting to
become a CMB board member can be quite vicious, and one
gangland-type killing at the Kibanda Hilton last year was attributed to
jockeying for a board seat.
Industrial development has lagged behind agriculture but textile
processing has been a growth sector recently. State-owned and private
spinning and weaving operations create cloth from locally grown cotton
essentially for domestic use. Economists of the USE-AID refer to cloth
production as “ a negative value added” industry in Kabinja since the
locally produced cloth sells for less on the world market than the cotton
from which it is made. However, private operations seem quite profitable,
in part because the CMB has constructed a complex pricing scheme when
selling to local textile operations. In contrast, state-owned firms are at
best breaking even and at worst receiving sizeable subsidies from the
government.
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Conway and Stapenhurst
Falling export revenues due to a recent drop in the world price of
cotton, poor harvests in the ICA region, and mismanagement in the civil
service have worsened Kabinja’s economic and social problems. The
government is activity courting foreign investment, offering generous tax
and other concessions to foreign companies, especially those in the
mining sector. To date, investment remains low, however, and there are
unconfirmed reports of foreign companies making large “facilitation
payments” to members of the president’s family.
Efforts to build a sound economic base for sustainable
development and prosperity have been hampered by domes-
tic instability and corruption, both petty and grand.
The Government
Over the past decade, the people of Kabinja have repeatedly reelected
Jeremy Masterson to form a succession of governments. He has in each
campaign promised economic and democratic reforms. Progress on both
fronts remains mixed, however, and some observers claim the elections
were rigged.
The ruling party is the Liberal Party of Kabinja; it has a two-thirds
majority in Parliament. The main opposition party, the Progress Party of
Kabinja, is vocal but largely ineffective. Until recently, Parliament was
considered a rubber stamp legislature; now, the opposition’s new leader is
calling for an increase in parliamentary oversight and has proposed
establishing an ombudsman. The Auditor-General is considered “one of
the President’s men.”
The media is largely state-controlled, but the small private media
have been outspoken critics of the government. While there is nominal
press freedom, police have harassed and, on occasion, arrested investiga-
tive journalists. There are disturbing incidences of journalists disappear-
ing or meeting untimely deaths, particularly as these journalists were
reportedly investigating incidences of grand corruption.
Civil society is quite strong, with numerous grass roots organiza-
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Kabinja: A Case Study
tions, professional associations, and NGOs. Many of the latter receive
considerable support from external donors.
Evidence of Corruption
There is evidence throughout Kabinja of “grease money” in daily transac-
tions. The executing agencies for USE-AID projects1 have often com-
plained that they spend substantial amounts to obtain licenses and
permits necessary to complete projects. While the Board of Executors has
acknowledged these complaints, the Masterson Administration contends
they are simply products of jealous, naive foreign contractors. According
to this argument, the culture of gift giving is destructive or loss inducing
only if business executives fail to understand it. Foreign contractors may
find it difficult to operate in this atmosphere but indigenous firms
prosper. The Masterson Administration uses this argument, in fact, as its
justification for hiring Kabinja firms to do all subcontracting associated
with USE-AID projects.
Mettie Clarkson knows her audience. The Board of Executors will
not be swayed by anecdotal evidence on either side of this argument. She
believes the public perceptions survey on worldwide corruption, recently
published by the multinational Risk Management Firm, is pretty much
on the mark. It ranks Kabinja as one of the more corrupt developing
countries, sixty-one out of the ninety-five countries rated. Informal
interviews with citizens and firms both inside and outside Kabinja suggest
that corruption is a problem, especially for public services at the point of
the delivery. Many citizens believe they must bribe teachers and princi-
pals, health administrators and magistrates if want access to public
services. The Masterson Administration denounced Risk Management
Firm and its survey results. It claimed that foreigners were out to discredit
the government; and academics at the state university in Kabinja ques-
tioned the results validity, given the small sample size although policy
advisors at the USE embassy verified the survey only measured public
perceptions. Mettie is convinced, however, that she can open a dialogue
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Conway and Stapenhurst
with President Masterson in an effort to encourage the Kabinja Govern-
ment to establish an anti-corruption body and seriously tackle some of
the issues raised in the survey.
Present Quandary
External aid has been an important source of government revenue but,
with the end of the cold war, it has declined especially as donors have
become concerned about governance issues. Until recently, the Masterson
Administration has argued that what is called “corruption” by the West is
merely the traditional way of doing business in the region. This argument
has lost some of its persuasiveness, however, as neighboring Yagandaw
and Xandar have reduced corruption considerably in their societies.
Since a number of aid agencies have substantial commitments to
Kabinja, they have decided to form an interagency working group on
corruption. Roger Maring, resident representative for the International
Monetary Bank, is chair of the group. He has made valiant efforts to build
consensus among the agencies on core corruption issues, but privately
has told Mettie the deliberations are discouraging. Donors are unwilling
to penalize the Masterson Administration for episodes of malfeasance if
retribution jeopardizes bilateral initiatives; and every donor seems to have
an initiative at present! The USE-AID governance specialists have not
been helpful. While they recognize the problem, corruption is so perva-
sive they struggle with what to recommend first.
Through all this, the Masterson Administration sails for-
ward serenely. The results of the Risk Management Firm survey
were widely publicized in Kabinja’s press, but to-date there
has been little government action. Some private newspapers
are reporting that the lack of movement is due to the fact that
corruption is too close to the government. The President
claims the survey demonstrates that he is clean and calls on
international donors to redouble their support for Kabinja.
Mettie’s fortnight is nearly over and the Board of Executors
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Kabinja: A Case Study
is anticipating her report. What will she recommend as the
USE-AID’s policy on corruption in Kabinja?
Questions and Issues Addressed Through the Case Study
1. Which are the most vulnerable institutions? How can aid or
intervention help strengthen these institutions?
2. How can USE-AID incorporate a focus on anti-corruption in its
country assistance program?
a) Assuming an emphasis on institution building, how can
USE-AID prioritize and target these institutions?
b) How can USE-AID maximize synergy between its efforts to
strengthen institutions and build capacity, and those of other
donors/international institutions?
3. What additional support and/or sanctions should USE-AID
countries consider?
Part Two: One Year Later
The Progress Party of Kabinja, to everyone’s surprise, wins a landslide
election with promises of a more equitable distribution of resources,
protection of the rights of the poor, and a war against corruption. Press
freedom laws are passed, an anti-corruption agency appointed, which is
independent and reports directly to Parliament, and the President makes
a symbolic declaration of assets, a gesture followed quickly by his
government Ministers. Parliament considers establishing its own code of
ethics and a new Auditor General (AG) has been appointed. But the AG’s
office remains understaffed and its budget, allocated by the Ministry of
Finance, remains woefully inadequate.
Despite these changes, people in Kabinja remain skeptical. Donors,
by contrast, are keen to support reform efforts and increased aid flows.
The President asks the International Monetary Bank to undertake a
corruption survey and to recommend policy changes. A survey is
conducted, contracting a consortium of state and private universities and
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Conway and Stapenhurst
Kabinja think tanks. They convene a focus group comprised of Kabinjan
industrialists.
Survey
The results of that survey are summarized in Charts 1 through 16 in
Annex One. The following are highlights from those charts.
• Chart 1: Two-thirds of individuals and businesses reported that
corruption occurred very frequently.
• Chart 2: There was a clear correlation between levels of service
delivery and frequency of corrupt payments; police, customs, and
utilities are judged to be the least efficient/most corrupt govern-
ment services; property registration, state-owned banks, and the
telephone company the most efficient/least corrupt.
• Chart 3: Business managers’ time spent with officials is highest in
the areas of government procurement and utilities and customs;
lowest in the areas of building permits, the judiciary, and property
registration.
• Chart 4: Bribes are a particular burden for small-scale businesses.
• Chart 5: There appears to be some improvement in reported levels
of corruption.
• Chart 6: Corruption is a major cost to companies and discourages
private investment.
• Chart 7: Kabinja shows higher levels of corruption than Yagandaw
and Xandar
• Chart 8: Public officials report that low levels of civil service pay,
which have declined in real terms over the past decade, and a weak
judiciary are the principal causes of corruption.
• Chart 9: At the household level, bribes are paid most frequently to
the police and utility, water/electricity, employees.
• Chart 10: There are many reported obstacles in the judicial system.
• Chart 11: Within the judicial system, payments are most frequently
made to secretaries.
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Kabinja: A Case Study
• Chart 12: Firms report road police, procurement officials, phone
installation and export/import license employees, and customs
officials ask for bribes.
• Chart 13: Corruption is a particular problem among procurement
officials, police, utility employees, and customs officials.
• Chart 14: There is a correlation between meritocracy and levels of
individual corrupt acts.
• Charts 15 and 16: Incidences of institutional corruption. In Chart
15, the information is probably unreliable as people fear harass-
ment by the government if they accuse the country’s Prime
Minister or President of malfeasance.
Focus Group: Excerpts of Conversations
Concerning Corruption
Olav Reunger, private owner, textile import/export company:
I have good cotton clothes that I import from Indonesia and I could
make them available to Kabinjan consumers at a low price. Unfortu-
nately, I can’t get the product through the port without paying a large
bribe. First I pay the tariff; then, the customs inspector won’t let me
leave with the goods until I “salute” him. He deserves a living wage,
but I shouldn’t have to pay it!
Nellie Sime, Japanese investor considering an auto assembly plant in
Kabinja:
Kabinja has many advantages as the site of our next auto plant—
skilled workers, a non-union environment, and pro-investor
legislation. My consortium was not confident that it could trust the
Masterson Administration to keep it that way but we are prepared to
give the new government the benefit of the doubt. There are
well-meaning, business-oriented people in Parliament but there are
too many factions. Coherent policy-making is difficult. The
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Conway and Stapenhurst
Masterson Administration bureaucrats always seem able to put
together a majority behind their legislation and too often, their
legislation appears to be the first step toward squeezing concessions
from the foreign investor.
Annette Mason, student activist at the state university:
Guaranteeing freedom of the press is a real concern for me. The
state-run media are full of crooks. Their stories favor the highest
bidder. This country has good people working in journalism and
they try hard to report fairly about the government activities. The
independent newspapers and magazines are poorly funded and are
constantly in financial difficulty. If the journalists report something
that offends Jeremy Masterson, here come their creditors, insisting
on their money. And then there is the government’s monopoly on
newsprint paper. Newspapers can be quite effectively shut down just
by a decision to cut off the paper supply. My fellows and I would love
to step in and assist these journalists, but we are poor students. When
the problems are economic, we are not especially effective allies.
Phillip Donner, sharecropping farmer on the ICA plantation:
Our government did a wonderful thing when it came up with the
ICA. It has tremendous potential. My family can produce so much
more on ICA plots than we did on our independent farm. We can’t
enjoy all our hard work, though. The ICA managers are always
asking for “contributions.” They tell me that it’s only right since there
are so many people petitioning to take our place in ICA. We keep
having to convince them that we deserve to stay! Yes, it’s illegal. But
the courts provide no relief. The verdicts there go to the highest
bidder. I cannot rely upon the courts to protect my rights in the ICA
because the administrators can afford to pay the magistrate more
than we can.
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Kabinja: A Case Study
Questions and Issues
1. How should donor countries change their country assistance
programs?
a) Would the emphasis on institution building, change, and if
so, how?
b) What are the implications for donor coordination?
2. What additional support and/or sanctions should donor coun-
tries consider?
3. Should increased donor support carry preconditions such as
progress in curbing corruption? If so, what are the measurement
tools?
Notes
1. 70 percent are grants and 40 percent are loans tied to European
procurement.
Chart 1: Kabinja—Extent of Corruption
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Conway and Stapenhurst
Chart 2: Kabinja—Corruption and the Quality of
Government Services
Chart 3: Management and Administrative Time Spent
Wth Officials
159
Kabinja: A Case Study
Chart 4: Kabinja—Petty Corruption and Small-Scale
Business Activities
Chart 5: Enterprise Perception of Change in Corruption
Level Compared to Two Years Ago (average, n=1164)
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Conway and Stapenhurst
Chart 6: Kabinja—Cost of Corruption and Crime
Chart 7: Regional View—Obstacles to Doing Business
in Atlantis
161
Kabinja: A Case Study
Chart 8: Public Officials’ View—Sources of Corruption
Chart 9: Kabinja—Common Bribes Paid by Citizens
(respondents’ characteristics in parentheses)
162
Conway and Stapenhurst
Chart 10: Importance of the Following Obstacles for the
Use of the Courts
Chart 11: To Whom Did You Make Added Payments?
163
Kabinja: A Case Study
Chart 12: Kabinja—If Firm Has Bribed How Frequently?
Chart 13: Regional View—Purchasing Public Positions
164
Conway and Stapenhurst
Chart 14: Lack of Meritocracy Leads to Corruption
Chart 15: Kabinja—Public Officials’ Views on Dishonesty
in Institutions
167
Superme Audit Institutions and Their Role in Fighting Corruption
Supreme Audit Institutionsand Their Role inFighting Corruption
Wilhelm Kellner
THE INTERNATIONAL ORGANIZATION OF SUPREME Audit Institutions
(INTOSAI)1 is the professional organization of supreme audit institu-
tions (SAI) in countries that belong to the United Nations or its
specialized agencies. SAI play a major role in auditing government
accounts and operations, and in promoting sound financial manage-
ment and accountability in their governments. As the internationally
recognized leader in public sector auditing, INTOSAI issues interna-
tional guidelines for financial management and other areas, develops
related methodologies, provides training, and promotes the exchange of
information among members.
By choosing “The Role and Experience of the SAI in Preventing and
Detecting Fraud and Corruption” as the main theme for its triennial
international congress in 1998, INTOSAI has encouraged SAI to partici-
pate in this struggle and to pool their expertise on this matter. SAI agreed
that fraud and corruption are significant problems affecting all countries
in varying degrees and that the SAI should endeavor to create an environ-
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Kellner
ment that is unfavorable to such abuse. In order to meet this obligation,
SAI agreed in particular to
• take a more active role in evaluating the efficiency and effectiveness
of financial and internal control systems and aggressive follow up
in SAI recommendations;
• establish an effective means for the public dissemination of audit
reports and relevant information including establishing a good
relationship with the media and producing relevant audit reports
that are understandable and user-friendly;
• consider a closer cooperation and appropriate exchange of
information with other national and international bodies fighting
corruption; intensify the exchange of experiences on fraud and
corruption with other SAI; and
• consider the establishment of a well publicized means to receive and
process information from the public on perceived irregularities.
International Organization of Supreme
Audit Institutions
Mission and History
INTOSAI is the professional organization of supreme audit institutions in
countries that belong to the United Nations or its specialized agencies.
SAI play a major role in auditing government accounts and operations,
and in promoting sound financial management and accountability in
their governments. As citizens, international donors and others have
increasingly higher expectations of national governments and these
governments depend on SAI to help ensure public accountability.
INTOSAI supports its members in this task by providing opportunities to
share information and experiences about the auditing and evaluation
challenges facing them in today’s changing and increasingly interdepen-
dent world.
INTOSAI was founded in 1953 and has grown from the original
thirty-four countries to a membership of over 170 SAI. Its Lima
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Superme Audit Institutions and Their Role in Fighting Corruption
Declaration of Guidelines on Auditing Precepts, adopted at the Ninth
International Congress and known as the Magna Carta of government
auditing, provides the philosophical and conceptual framework for
INTOSAI’s work.
As the internationally recognized leader in public sector
auditing, INTOSAI issues international guidelines for financial
management and other areas, develops related methodolo-
gies, provides training, and promotes the exchange of informa-
tion among members.
Organizational Structure
INTOSAI achieves its mission and goals through a variety of bodies,
programs, and activities. The principal bodies are as follows:
• Governing Board. The sixteen-member board meets annually to
provide leadership and continuity between congresses.
• General Secretariat. Located in Vienna, Austria, the General
Secretariat provides central administrative support to INTOSAI,
manages the INTOSAI budget, assists the board and congresses,
facilitates communications among members, and organizes
seminars and special studies. The Secretary General is the Presi-
dent of the Court of Audit of Austria.
• Regional Working Groups. Seven regional working groups promote
INTOSAI’s goals regionally, thus, providing members with
opportunities to focus on issues characteristic of their region.
• Committees and Working Groups. Much of INTOSAI’s technical
work occurs in the committees and working groups established to
advance the profession by developing and issuing professional
standards, guidelines, methodologies, bibliographies, and other
practical reference materials. INTOSAI members participate in this
work by joining committees, commenting on committee products,
and attending technical sessions at congresses.
• International Congress of Supreme Audit Institutions (INCOSAI).
Hosted by a member SAI, the triennial congress offered all
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Kellner
INTOSAI members a unique opportunity to gather at one time
in one place to share experiences, discuss issues, and pass
recommendations aimed at improving government accountabil-
ity worldwide.
The Role of Supreme Audit Institutions in
Fighting Corruption
Emphasis on the fight against fraud and corruption is increasing
throughout the world and joint strategies are being developed to combat
this so called social disease that threatens to undermine and weaken
democratic systems and economic growth.
Choosing fraud and corruption as the main theme for the XVI
INCOSAI, which took place in Montevideo, Uruguay in November 1998,
reflected INTOSAI’s growing awareness of a problem that exists in
varying degrees and forms in member countries. INTOSAI encouraged
SAI to participate in this struggle and to pool their expertise. They found
the topic very relevant and recognized the need for designing efficient
audit strategies to tackle the problem. The main theme “The Role of SAI
in Preventing and Detecting Fraud and Corruption” was split in two
subthemes: The Role and Experience of SAI in Preventing and Detecting
Fraud and Corruption; and Methods and Techniques Used in Preventing
and Detecting Fraud and Corruption. Principal papers on these sub-
themes were prepared by the SAI of Austria, the role and experience, and
the United States, methods and techniques, and distributed to all SAI
members around the world.
Preparations for the XVI INCOSAI
Seventy SAI prepared 130 country papers describing their individual
experiences based on the principal papers. The resulting contributions
were analyzed and served as the basis for the theme’s keynote speech and
discussion papers presented to the congress.
The country papers contributed their individual perceptions of the
corruption phenomenon and a broad consensus of the term’s meaning
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Superme Audit Institutions and Their Role in Fighting Corruption
became apparent. Differences in definition mainly concern to what extent
actions and practices are deemed fraudulent or corrupt from an ethical or
moral point of view and what specific actions are penalized. Therefore, it
seemed advisable not to waste precious energy constructing a globally
accepted definition of this phenomenon but focus on the role of SAI in
their fight against fraud and corruption.
SAIs’ Role and Experiences in Preventing and Detecting
Fraud and Corruption
Sound Financial Management and Efficient Internal Controls
SAI, responding generally, agree that the reliability of financial manage-
ment systems is essential in preventing abuse. Effective internal control
systems also have an inhibiting effect on potential perpetrators. Most
ensured that evaluating the soundness of these systems is done regularly
as an integral part of compliance audits.
AUDIT PLANNING FOR HIGH RISK AREAS. Few SAI have analyzed and
determined circumstances that indicate a high inherent control risk of
illicit influence on governmental activities. While some argue they are
handicapped by insufficient manpower to handle this kind of assessment,
they agree limited staff skills and abilities, lack of function separation,
procurement of goods and services without competitive bidding, weak
internal control systems, low managerial capabilities, and political
appointments are examples of high-risk indicators.
RECOMMENDATIONS TO THE LEGISLATURE. Most SAI indicate their coun-
tries have sufficient legal provisions to penalize and prosecute corrupt
practices. Regulations and rules aimed to ensure free, transparent
competition govern tendering procedures. Some warn of loopholes in the
regulation framework, and others report they do not have the mandate to
recommend to legislative authorities perceived shortcomings in the
practical implementation of regulations and rules.
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Kellner
Expertise in the Prevention and Detection of Fraud and Corruption
Almost all acknowledge there are other institutions that fight corruption,
for example, the prosecution, police authorities, or parliamentary task
forces. Most agree these bodies would benefit from an improvement in
the exchange of information. Only a few argue such a policy could
endanger their independence. All the responding SAI highly recommend
an intensified exchange of experiences and information on international
cases of corruption and fraud. While in some cases increased communi-
cation has begun, many think a more universal approach is necessary.
Some SAI currently follow regulations that govern the discovery of
possible illicit acts. But few were legally obligated to refer these suspicious
activities directly to prosecution offices.
Generally, it was felt that SAI should actively raise the public’s aware-
ness of the risks associated with fraud and corruption and foster good
governance and standards of conduct. While many want to promote codes
of conduct and ethical standards and encourage their incorporation into
the public servants’ training, some considered it excessive intervention into
governments’ internal affairs. However, they agreed it was critical they
employ safeguards from risks of abuse within their organizations.
The majority of SAI that responded annually publishes audit reports
after submitting them to parliament. The findings get sufficient coverage
in the media although some SAI argue their main objective is to provide
the parliament with an independent opinion. Others contend it is also
necessary to maintain and strengthen ties with the press. In some cases,
this argument is moot since excessive time lags between actual audits and
the publication of the reports preventing their timeliness and relevance.
Methods and Techniques Used in Preventing and De-
tecting Fraud and Corruption
Maintaining a Preventative Environment
Experts agree it is easier to prevent than to detect fraud and corruption.
Key elements in creating and fostering a preventive environment include
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Superme Audit Institutions and Their Role in Fighting Corruption
strengthening financial management systems, evaluating internal control
systems to identify and correct weakness, and heightening public aware-
ness of SAI findings.
Strengthening Financial Management
Annual financial reporting, which includes financial, compliance and
performance information, is a core part of a strong financial management
system necessary for effective accountability. Nearly all SAI agreed that
strong financial management, based on reliable, complete, and timely
financial reporting, supports a preventive environment by limiting the
opportunities for abuse. Even those with limited experience considered
sound financial management a precondition for prevention. Most
countries require that the heads of government departments prepare
annual financial statements. These annual statements were audited by the
SAI and, in some cases, public accounting firms, thus, limiting oppor-
tunities for irregularities.
Evaluating Internal Control Structures
The principal paper described evaluating systems of internal controls, and
developing recommendations and subsequent improvements as the main
components of a control environment that are central to prevention
strategies. However, most SAI failed to construct such standards for
internal controls but rather served as advisors. It is not mandatory to
accept their guidance. While they assess internal controls, nearly
one-third reported that no requirement exists for program officials in
their governments to assess and report on the internal control systems.
One SAI recounted that more than 70 percent of the fraud it uncovered
over a three-year period was attributable to either the absence of proper
controls or the failure of existing ones.
SAI are less aggressive about monitoring recommended improve-
ments to internal controls although it is oftentimes within their authority.
Most check those recommendations during the annual audit. In some
cases, the responsibility for following up on recommended changes lay
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Kellner
solely with the government official responsible for the audited depart-
ment. Further, none of the papers identified a formal system that tracked
recommendations to ensure they had been implemented.
Several of the SAI referred to the significance of civil servants’
personal and professional integrity in their discussion of internal control
systems. They described their experiences with corruption pointed to
management weakness and failure as significant factors and suggested
penal provisions that are more comprehensive, greater cooperation
among government authorities, and public disclosure as possible
mitigating elements.
Heightening Public Awareness of SAI Findings
In addressing prevention issues the principal paper pointed to heighten-
ing public awareness as a means of increasing accountability through
timely public disclosure of audit findings. Reporting these findings and
any resultant legal action enhances fraud prevention by informing
government officials and the public that effective internal controls are in
place and working. The degree to which SAI publicize audit findings
ranges from those that submit it only to parliament, a few who make
restricted distributions, to those who routinely release findings to the
public as soon the results are issued.
SAI views differ regarding the preventive value of publicizing audit
results. Some said that public disclosure deterred fraud and corruption.
At best, they contend that public disclosure of corrupt officials deters
managers from collusion and other corrupt practices and, at the very
least, modestly increases public awareness. Others questioned that
premise and a few countries expressed concern that public disclosure can
lead to schemes that are more sophisticated and better-informed crimi-
nals. Consequently, some include only noteworthy findings in their
annual report.
The principal paper discussed one technique that is directly tied to
public involvement: promotion of a mechanism for citizens to report
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Superme Audit Institutions and Their Role in Fighting Corruption
fraud and corruption. SAI that establish an anonymous method for the
public to report suspicious activity can strengthen a preventive environ-
ment and identify fraudulent activities. However, few had formal systems
in place to receive such information. Most SAI relied on written
correspondence as the primary mechanism for reporting possible crimes.
Technologies such as the Internet or telephone hotlines are very limited.
Standards of Conduct
While SAI recognize the value of employees with high ethical standards,
few reported government-wide codes of ethics. Standards of conduct,
however, are in place in a majority of SAI. In some countries, these codes
are agency-specific; in others, the standards are components of a penal
code or other regulations. Several government managers regarded moral
qualities such as trustworthiness, loyalty, and righteousness, as character-
istics of strong ethical conduct imbued in their officials by virtue of their
academic achievement or professional qualifications. Yet, others stated
outright that civil servants are aware of what is expected of them and,
consequently, will not engage in fraudulent activities.
Financial Disclosure
A comparison of SAI responses shows a wide range in what is reported,
who must report, and how often reports must be filed. As to the efficacy
of public disclosure of private assets, opinions vary. One SAI considers
public disclosure a breach of personal privacy.
High Risk Reviews
SAI follow many practices to identify areas at risk for inherent control
weakness. They range from utilizing a previous year’s audit work as a
basis for planning to systematic across-the-board evaluations of program
vulnerability based on external controls, a history of program abuse, and
management strengths or weaknesses. These two approaches represent
different concepts of risk assessment. In the first, program or departments
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Kellner
are ranked in order to prioritize a comprehensive audit plan. SAI report
that high risk audits had identified significant fraudulent activity.
The second approach focuses more on targeting audit activities to
particular program areas, rather than departments that pose a significant
threat to public resources. For instance, one SAI identified road construc-
tion as a high-risk area.
Identifying Fraud Indicators
Fraud indicators are generally difficult to identify. An auditor must rely
on technical experience, professional judgement, and a firm under-
standing of how fraud is committed to successfully recognize its
indicators. Most SAI considered lack of experience and training as the
biggest obstacles.
XVI INCOSAI: The Role of SAIs in Preventing and Detect-
ing Fraud and Corruption
Among the numerous considerations expressed, there is consensus that
corruption has surfaced in all forms of government. Moreover, it occurs
in all spheres of society. The INCOSAI delegates acknowledged govern-
ment corruption results in a waste of resources and a reduction in
economic growth and quality of life. It undermines government
credibility and reduces its effectiveness. Some SAI commented they
have observed a strong correlation between the level of corruption and
the weakening of the lawful state and its institutions, along with the
violation and erosion of individual rights. The socioeconomic environ-
ment of the population cannot be ignored when analyzing and dealing
with corruption. Since social injustice, poverty, and violence are often
linked with corruption, it is virtually impossible to isolate corruption as
a separate problem.
The membership is also aware that a country’s traditions, principles,
and values influence the nature of corruption and although the SAI can do
little about the fabric of society, it can influence the approaches used to
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Superme Audit Institutions and Their Role in Fighting Corruption
combat this problem. It is INTOSAI’s hope that SAI can, through concerted
action, play a role in promoting a culture, which rejects waste and values
honesty, responsibility, and the rational utilization of economic wealth.
Further, SAI agree it is difficult to detect many acts of corruption and
to estimate their financial impact as the loss to the state does not neces-
sarily show in the financial statements’ accounting records. Nevertheless,
statistical indicators exist that point to a likely relationship between
various indices of public finance and perceived levels of corruption. Some
of the most common forms of corruption include misappropriation of
assets, patronage, influence peddling, and bribery.
There is consensus that laws and regulations, along with adequate
oversight and enforcement, can deter malfeasance. Some SAI note that
excessive laws and regulations might, in fact, encourage corruption and
that over regulation, too, is a danger. The following are examples of
government areas that are particularly vulnerable to abuse:
• collection of taxes and other sources of revenue
• administration of procurement and contracts
• concession of subsidies, permits and licenses
• hiring and administration of personnel
• customs and
• the privatization process
Notes
1. Further material and information about the work of INTOSAI and
useful links to other supreme audit institutions can be obtained on
the INTOSAI website: http://www.intosai.org
References
Dye, K. and R. Stapenhurst. 1998. “Pillars of Integrity: The Importance of
Supreme Audit Institutions.” Discussion paper. (September).
Washington, D.C.: The World Bank.
Pope, Jeremy, ed. 1997. National Integrity Systems: The TI Source Book. 2nd
edition. Washington, D.C.: The World Bank.
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Sahgal, V. 1996. “Strengthening Legislative Audit Institutions: A Catalyst
to Enhance Governance and Combat Corruption.” Unpublished.
The IX Congress of INTOSAI. 1977. Lincoln, Penn.
181
Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
Terms of Engagement forBilateral Donors:A South African Perspectivefrom Civil Society
Lala Camerer
THE POLITICAL PROCESS SURROUNDING TERMS of engagement between donor
and recipient countries around development assistance generally, as well
as focusing on anti-corruption initiatives more specifically, is a paradoxi-
cal subject.
In recent years, leading critics of development assistance have raised
legitimate questions about recipient countries’ effectiveness in soliciting,
receiving and utilizing donor support. They argue that the concept of
“aid” is ill conceived and entails pouring resources into a bottomless pit in
the third world where there appear to be few returns other than ingrati-
tude, abuse and misuse with limited accountability.1 Corruption in
development assistance has reduced the productivity of aid-funded
development projects and weakened public support in donor countries,
particularly during times of financial stringency. Bilateral donors have
responded to international public criticism by an increasing resolve to
examine and combat corruption.2 Their efforts include
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Camerer
• tightening internal controls to limit opportunities for abuse;
• helping recipient countries develop systems for managing aid,
including a special focus on public service reform;
• adopting conditionality, with the threat of aid reduction;
• funding a wide variety of projects that bear directly and indirectly
on corruption, including strengthening criminal justice responses
and funding civil society initiatives.3
The terms of engagement for bilateral donors with recipient coun-
tries such as South Africa (SA) is largely dictated by the country develop-
ment assistance framework. This paper takes a broad look at the agree-
ments between donors and recipient countries, accentuating the donor’s
role; and specifically examines how South Africa, as a recipient country,
has developed guidelines to facilitate a confidential donor/recipient
relationship. In many instances, South Africa is an exceptional case and
one should be wary of transposing this experience uncritically. However,
there are some key principles, underlying the terms of engagement, which
may be useful. Coordinated anti-corruption efforts among civil society
stakeholders are also briefly discussed.
The Case of South Africa
This section examines the development profile and policy of South Africa,
the development assistance framework that provides formal guidelines,
and the terms of engagement for general donor assistance. Although non-
governmental organizations (NGOs) fall outside bilateral development
assistance, they are important both historically in the South African
context and in the role they play in democratic consolidation.
Development Profile and Policy
While South Africa appears to be a relatively prosperous, middle-income
country with $3,000 GDP per capita, a modern financial and industrial
sector, an excellent infrastructure, and the most diversified and advanced
economy in Africa, that prosperity is reserved for only a small portion of
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
its population. Decades of legal discrimination have led to a situation in
where income differences generally coincide with race. This is most
starkly represented in the life expectancy of whites, which is seventy-five
years compared to fifty years for blacks. The overall Human Development
Index of South Africa is 650—whites score 878 and blacks score 462, with
a poverty share of 95 percent. White South Africa ranks 24th compared to
Black South Africa’s ranking of 123rd out of 180 countries.
Following the 1994 elections, the South African government adopted
the five-year Reconstruction and Development Programme (RDP) as its
primary development strategy to redress the imbalances created by
apartheid. Its major goals were to
• eliminate poverty and inequality generated by decades of apartheid
• raise living standards
• develop human resource capacity
• address imbalances and structural problems in the economy and
labor markets
• end discrimination in business
• establish a living wage
• address economic imbalances in Southern Africa
• develop a prosperous and balanced regional economy
However, in 1966 the Growth, Employment and Redistribution
Strategy (GEARS) was introduced as it became evident that the growth
needed for attaining development goals could not be driven purely by
public expenditure. The redistribution of wealth and resources would
have to be fuelled by market-led economic growth.
One of the core elements of GEARS is a renewed focus on budget
reform to strengthen the redistributive thrust of government expendi-
tures. To give effect to this, government introduced a three-year rolling
expenditure plan known as the Medium Term Expenditure Framework
(MTEF). Its intention is to assess how the budget and the reprioritization
of expenditures can address reconstruction and development, and to
ensure greater alignment of official development assistance (ODA)4 with
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strategic interventions in certain key areas. These include education,
health, welfare and social security, infrastructure investment, an inte-
grated justice sector (police, justice and correctional services), and
personnel spending.
The nature and extent of bilateral development assistance to South
Africa makes it relatively unique on the continent and contrary to the
situation in many developing countries. ODA amounts to between 1 and
1.5 percent of the annual budget compared with 75 percent of the budget
of neighboring Mozambique. Development assistance is made available
in a variety of forms broadly classified as grants (actual funds), technical
cooperation (expertise), and financial cooperation (loans, credit guaran-
tees). In South Africa, it is generally accepted that ODA-funded projects
and programs should be aligned with development priorities and
interventions, and integrated into the normal functioning of government.
The idea of donor-supported projects managed in a stand-alone/isolated
manner is strongly opposed.
Development Assistance Framework
Development assistance to South Africa before 1994 (the date of the first
democratic elections) provides an interesting case study on how bilateral
donors that are often more comfortable with government to government
arrangements, utilized civil society. Western donors channelled millions
of dollars, guilders, krone (often secretly and sometimes with negative
consequences for accountability) to organizations opposed to apartheid.
These contributions were vital in ensuring that basic services were
delivered to the people who were denied the right to citizenship. Through
supporting and engaging key civil society actors over many years, the
donor community played an important role in bringing down one of the
most pernicious systems of racial oppression.
Prior to 1994, aid was almost exclusively channeled into the NGO
sector for anti-apartheid activities. However, post-apartheid foreign
assistance increasingly was diverted to the South African government,
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which requested that donors begin to lead the process. This meant donors
“gave up their behind the scenes coordination” and it appeared that the
donor community was much more organized when it had the common
agenda to fight apartheid. Within this context, the need arose for coordi-
nating mechanisms within the South African government. The Interna-
tional Development Coordinating Committee (IDCC), chaired by the
Department of Finance, was instituted in 1994 to act as the principal
channel between the government and donor community. In the absence
of an established management framework, the ODA became the principal
agency to distribute funds to projects financed through the RDP. The
RDP established by Act No. 7 of 1994 provided a central account for
donor funded government projects.
With the closure of the RDP office and the integration of the RDP
into departmental budgets, the function of ODA management and
coordination was transferred to the Chief Directorate: International
Development Cooperation (IDC) in the Department of Finance. All
national departments have been urged to register their intention to solicit
ODA with IDC as well as submit quarterly reports on the status of their
discussions with the donor community. Bilateral donors have also been
urged to channel their activities through the IDC.
Various initiatives have been undertaken to formulate regulations and
disseminate knowledge about such regulations among line departments.
Most recently, a comprehensive document entitled “Draft Policy Frame-
work and Procedural Guidelines for the Management of Official Develop-
ment Assistance, Draft Two, January 2000” has been prepared. The primary
goal of this report is “to ensure that all role players involved in the manage-
ment of ODA have a clear understanding of how it should be managed in
order to achieve optimal impact. This is to satisfy the interests of the South
African Government as well as its partners in the international donor
community.” Additionally, key processes are delineated for the donors and
implementing agencies for ODA. The proposed guidelines provide the
“formal” terms of engagement for bilateral donors around general develop-
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ment assistance to South Africa and point to the process for engaging with
the government around anti-corruption initiatives. Essentially, a case is
being made for a strong coordinating center.
A number of reasons may explain why it is not advisable to apply the
current ad hoc and somewhat decentralized approach to soliciting ODA.
In addition to virtually all donors requiring a single point of entry to the
South African government, such an approach undermines a coherent,
coordinated approach to managing ODA; impedes South African
ownership of ODA; complicates its overall management; and makes it
difficult to ensure that ODA is utilized legally.
A 1998 report on the donor community commissioned by the South
African office of the United Nations confirms the need for a formalized
approach to ODA. The report sited problems that include:
• unduly complex and problematic mechanisms;
• a general absence of standardized procedures pertaining to all areas
of soliciting, procuring, managing, and monitoring of projects;
• weak inter and intradepartmental communication;
• coexistence of numerous coordinating structures; and
• uncertainty as to the degree of provincial autonomy vis a vis
national structures in soliciting funds and technical assistance.
The above problems have led to a circumvention of official routes by
donors and recipients, as well as delays in concluding and implementing
funding agreements, organizational overlap and confusion over lines of
authority, accountability and responsibility, actual fragmentation, and
duplication of projects.
The responsibility and accountability for the implementation of
ODA supported projects and programs are vested in the South African
implementing agencies, namely government departments, provinces, and
local authorities. The absence of a central decision-making body that
determines the allocation of ODA means that any implementing agency
can legally approach the donor community directly to solicit assistance.
Most sectors have established a relationship with the donor community
and think a centralized framework is superfluous. However, it is an
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
essential instrument in the coherent management of assistance at the
sectoral level, particularly as the RDP Fund Amendment Act prescribes
the heads of departments and provinces that are accountable for ODA.
This hopefully will encourage responsible management of donor funds.
Arguably, decentralization and local ownership are key driving forces
behind the new development agenda. Does the South African proposal
that centralizes ODA challenge this concept? Probably not, as the main
impetus is to establish responsible coordination of donor funds rather
than propose any sinister trend towards centralization.
The Development Cooperation Report (DRC) conducted by the United
Nations Development Programme (UNDP) is currently underway in South
Africa. The 2000 review examines the best way to align ODA to have the
greatest impact. Results of the impact of development assistance on South
Africa between 1994–1999, particularly in the democracy and governance
cluster, will provide further guidelines on how to optimally utilize develop-
ment assistance to achieve its objectives, including anti-corruption projects.
Terms of Engagement for Donors: Guidelines and Principles
Chapter Three of the above-mentioned document, “General Policy
Objectives for ODA,” delineates the terms of engagement from the South
African government’s perspective. Essentially, ODA shall “be managed
within the context of South African policy and legislation as its overall
strategic framework.” This is done “bearing in mind the restrictions
imposed by each of the donor governments.” Also, ODA cannot be
managed in isolation or used to fund “wish lists” that are not a part of the
government’s core development priorities; government has to avoid
seeking ODA simply because the budget is inadequate or a donor is
interested in providing support.
This strategic approach is designed to address “the process of
committing countries providing ODA to some form of agreement that
has not been coordinated and standardized but has been driven by the
agenda of donor countries wishing to have agreements signed when
dignitaries visit SA or vice versa”.5
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General policy objectives put forward for ODA in the document are to
• increase ODA for the benefit of the poor;
• accept full ownership of donor-supported interventions at the
macro and sectoral levels and in all spheres of government;
• align ODA to the MTEF and budget to promote sustainability
beyond donor’s involvement and ensure donor resources are
directed towards governments’ development priorities;
• use ODA to complement and encourage departments and
provinces to reprioritise their budgets towards the country’s
development priorities;
• manage ODA by coordination and coherence of various donor-
supported programs and projects at the macro, sectoral, and all
levels of government, including maximizing international develop-
ment experience and donor comparative advantages;
• use ODA to enhance long-term sustainability through capacity
building and skills transfer as part of all donor programme and
projects;
• ensure policy and technology choices relating to development
priorities will be determined by the South African government.
The principle that ODA interventions must be aligned with South
Africa’s reconstruction and development priorities to the fullest extent
possible underlies each one of these general policy objectives. Clearly,
South Africa is setting the agenda by laying down the ODA ground rules
and the practical processes detailed in the document are relatively
standard, including donor pledges, overall program support, project
identification, project assessment, decision-making around project
support, monitoring, and evaluation.
NGOs and Development Assistance
Following the 1994 change in government, many bilateral donors have
redirected the majority of their funds to the state to assist in the RDP’s
development and reconstruction goals. This has had devastating conse-
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
quences for some civil society organizations. Although the government is
aware that a portion of all development assistance is channelled through
civil society, it is not accountable for resources the donor community
distributes directly to recipients; this assistance is not included in the
formal bilateral development cooperation framework.
According to the draft policy framework document, “while the
government actively encourages overseas development aid to South Africa
it does not interfere with the relationships between foreign donors and
local NGOs. This is because government views the overriding procedural
objective of the granting of aid to be the simplification of the process, not
the ownership of the project. Despite requests for the inclusion of NGOs
(from some donors) within the Department of Finance’s realm of
management, the Department of Finance remains adamant that it has no
intention of allocating, controlling or accounting for donor resources to
the NGO sector.”
Donor assistance to post-apartheid South Africa is in a transitional
phase, bound to the consolidation of democracy. Among donors,
different sets of considerations seem to inform the tripartite relationship
between donors, the South African Government, and NGOs. Strategies
devised with the view to “consolidating democracy” emphasize either the
importance of building long-term capacity within the state or alterna-
tively bolstering a vibrant and plural civil society. The decision to support
the state and/or civil society may be determined by donor perceptions of
the state’s strengths or weaknesses vis-à-vis civil society.
Currently, while there remains intense assistance for government
activities and those NGOs performing government-related services, a
significant portion of assistance continues to go to NGOs. Support for
civil society is still built into certain bilateral agreements. For example,
both the Danish Government and the European Union (EU) ensure that
twenty-five percent of their funding goes to civil society organizations.
Increasingly, this will be a pertinent factor as the donor community
determines that South Africa is moving out of its transition phase
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towards consolidation, the stage where developmental initiatives may
begin to refocus on civil society.
NGOs are attractive developmental partners because they are
financially accessible to donors. In the past, targeting NGOs directly
allowed donors to circumvent complicated state tendering procedures.
Interestingly, government departments would also form alliances with
NGOs to avoid such regulations. However, the RDP Fund Act amend-
ment gives priority to the technical assistance agreement, meaning that if
procurement provisions appear in the agreement, South African tender
procedures do not apply.
Donors have increasingly asked NGOs to design and implement
projects, partly because donors can avoid state control and inefficiencies
since the government perceives aid-funded projects as less vulnerable to
scarce resources and a corrupt central administration. NGOs are generally
cheaper, more effective, and closer to the local population.6 Promoting
the role of NGOs is one of the best ways to balance state power as they
enhance the context and spirit of greater public accountability.7
Comment
Some commentators believe that in a context of declining ODA, where
government to government agreements necessarily take precedence,
NGOs need a framework that guides their relationship with local and
international agencies, otherwise they are destined to become increasingly
marginalized or alternatively co-opted. Civil society actors are recogniz-
ing the need to be organized, especially in attracting development
assistance for anti-corruption activities.
Additionally, the social contract between the state and civil society
stakeholders requires a more critical review. More clearly stated political
principles and administrative policies that regulate future partnerships
will significantly help rectify the current relationship, which is character-
ized by entrenched animosity between state and civil society actors and,
in some instances, unbridled competition for donor assistance.
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ODA and Anti-Corruption Initiatives in South Africa
This section briefly outlines the corruption debate in South Africa. The
key question is “how should donors engage and respond to approaches
for assistance from South Africa, particularly from government agencies,
that support anti-corruption measures?”
Corruption on the National Policy Agenda
Corruption as a priority domestic policy issue is a relatively recent occur-
rence and needs to be placed in the context of broader and more pressing
objectives of reconstruction and development. It will remain a key policy
issue as long as corruption inhibits the Mbeki Presidency’s objectives to
improve service delivery and erase the inequalities between South Africans.
Donors should be keenly aware that South Africa’s interest in confronting
malfeasance is largely shaped by the significant body of literature on the
impact of corruption on poverty and development.
While corruption is not a new phenomenon in South Africa, the
ANC-led government has taken a number of high profile initiatives to
address it following the media’s dramatic exposure of numerous
corrupt officials and widespread malfeasance in key sectors including
the police, correctional services, and housing and education. In
addition to local pressure, the government’s stated commitment
towards greater openness, transparency, and accountability is evolving
against a backdrop of an international impetus towards promoting
good governance.
In terms of nature and extent, no comprehensive diagnostic, integrity
survey has been conducted in South Africa although this is being pro-
posed under the United Nations Global Programme Against Corruption.
A number of opinion polls and surveys dealing with both the perception
and experience of corruption by citizens have, however, been conducted
in recent years.
• The national victimization survey in March 1998 found that
during 1997 3 percent of the respondents had experienced
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corruption by officials (defined as police officers or customs
officials accepting payment for services rendered).
• The Institute for Democracy in South Africa (IDASA) has directed
a number of opinion studies to measure attitudes towards public
sector corruption. In 1995, IDASA’s survey found that 46 percent
of South Africans felt that “almost all” or “most” public officials
were involved in corruption, in 1998 that number increased to 55
percent. Perceptions of corruption are spread across various levels
and branches of the public sector with the notable exception of the
Office of the President, where the perception is significantly lower.
• A recent opinion survey conducted by the Human Sciences
Research Council found that 80 percent of South Africans in
December 1998 agree/strongly agree that corruption exists within
the civil service.
Misuse of Donor Funds
There have been some high profile examples in South Africa regarding
the misuse of donor funds both before and after 1994, within civil society
and the state. Examples include Swedish support for the Rev. Allan
Boesak’s Foundation for Peace and Justice, where money destined for the
victims of apartheid found its way into Boesak’s personal account;
R726,000 for the production of twelve videocassettes on voter education
and democracy were spent on building a studio for his wife. Boesak was
found guilty for the theft of R259 000 and fraud involving R1.3 million
from the Foundation for Peace and Justice and sentenced to six years in
prison. His case is currently before the Supreme Court of Appeal.
The use of the term “struggle accounting” devised by Boesak and
others to stress that the secretive corrupt nature of the apartheid regime
made open and transparent bookkeeping on donor funds almost
impossible during the struggle years, raises questions for donors. Can
donors interact openly with civil society organizations in cases of severe
oppression? What checks and balances can be put in place to prevent a
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
situation similar to the Boesak case? While regular audits, independent
assessments, site visits, etc. may be routine for donors in democratic
contexts, other methods to account for donor funds may need to be
devised in less conducive environments.
Another highly publicized case of misuse of donor funds was the EU
funding of the Department of Health’s AIDS play, Sarafina Two. After an
inquiry by the Office of the Public Protector, donor money was subject to
improper tender and contract-awarding procedures with a litany of
irregularities surrounding the spending of R14.2 million on the anti-
AIDS play. When the furor developed over the project’s extravagance, the
EU stated that contrary to assertions made before Parliament by the
Minister of Health, it had never been asked to approve funds for the play.
The EU ambassador to South Africa stressed categorically that there had
been no prior authorization and regarded the diversion of funds as a
serious misuse of EU support. In this case, there was no evidence or
implication of abuse of official position or titles for personal gain, but a
clear case of aid diversion that bordered on mismanagement and lack of
both transparency and public parliamentary accountability.8
The EU’s experience with the Department of Health resulted in
bureaucratic and regulatory consequences for other South Africa organi-
zations such as the Institute for Security Studies (ISS), which received EU
funds following Sarafina Two. Comprehensive accounting procedures
obviously are necessary to regulate the use of donor funds but stringency
needs to be balanced with flexibility, particularly in relation to policy
work conducted by organizations such as the ISS.
Taking a Stand
Both the Mandela and Mbeki Presidencies have highlighted the impor-
tance of tackling the “moral crisis” manifested by high levels of violent
crime and widespread corruption. A number of anti-corruption confer-
ences (supported by donors such as Department for International
Development in London, the EU, and United States Agency for Interna-
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tional Development among others) have take place in the past eighteen
months and are an indication of the importance government attaches to
confronting corruption in South Africa. Additionally, several new policing
units and initiatives, which have a dedicated focus on fighting crime and
corruption have been formed, for example the Special Directorate for
Public Sector Corruption within the Office of the National Director of
Public Prosecutions.
Following the June elections, which the ANC fought largely on a
zero-tolerance anti-corruption ticket, Mbeki’s Cabinet formally endorsed
resolutions of the National Anti-Corruption Summit held in April 1999.
The Public Service Commission was identified as the “flag carrier” of the
anti-corruption program, which mandated the government implement
the most pressing Summit resolution to hold a meeting of relevant
stakeholders including business, labor, and civil society representatives to
establish a cross-sectoral task team. This task team has met several times
and is constructing the terms of reference for a National Anti-Corruption
Council responsible for broad strategic and policy advice regarding anti-
corruption activities across all sectors in South Africa. Since there is
currently no dedicated budget for this process, donors will most likely be
approached for assistance. The Public Service Commission has already
convened a donor roundtable. How should donors respond to these
requests within the South African government’s policy framework? First,
donors will have to be persuaded that the political will exists to tackle
corruption in South Africa.
Assessing Political Will
Political will is the key ingredient to an effective anti-corruption effort.
Without it, government statements to reform civil service, strengthen
transparency and accountability, and reinvent the relationship between
government and the private sector, ring hollow and remain mere rhetoric.
In South Africa, political will around the issue of corruption—public
discourse that identifies it as an issue of national concern—appears to
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
exist. However, how do donors assess the credibility of a government’s
intention to seriously fight corruption?
Some have suggested a review of environmental and situational
factors when assessing a recipient country’s political will to tackle
corruption. These factors include local ownership, leadership, the degree
of analytical rigor evident in working out strategies, the application of
tough and credible sanctions included in strategic plans, and the continu-
ity of anti-corruption efforts.9
A recent UNDP publication identifies the principal challenge in anti-
corruption reforms as distinguishing between reform approaches that are
intentionally superficial and designed only to bolster the image of
political leaders, and substantive efforts that are based on strategies to
create change.10 Several indicators that demonstrate genuine political will
have been developed to make this distinction:
• Understanding the phenomenon. Has the regime sought through
analytic rigor and information to adequately recognize the context
and causes of corruption as well as ways to address it?
• Issues of process. Has the regime adopted a strategy that is partici-
patory, incorporating and mobilizes the interests of many stake-
holders?
• Strategic considerations. Has the regime weighed the strategic
dimensions of achieving specific outcomes in relation to the
selection of reforms that are desirable, context specific, and cost
sensitive?
• Incentives and sanctions. Has the regime considered strategies other
than criminal sanctions that can mobilize functional relationships
to instill normative institutional change?
• Monitoring. Has an objective process that monitors the impact of
reform and incorporates those findings into a strategy that ensures
policy goals and objectives been created?
• Checks and balances. Is society pluralistic, allowing meaningful
competition in both the economic and political spheres
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through institutions, which provide a check on the arbitrary
abuse of power?
The South African government’s anti-corruption initiative has, in
many respects, pre-empted donor concerns. Donor influence, at this
stage, around good governance (for example, by raising the issue of
corruption) should be viewed as supportive of South Africa’s internal
anti-corruption policy process. One donor respondent to the United
Nations Desk for Economic and Social Affairs (UNDESA) survey on
ethics in the public service noted that “South Africa is different to other
countries in that it is not donors steering government in a specific
direction to tackle corrruption and encourage good governance. Rather,
South Africa is an example to other countries and leadership around
fighting corruption is coming from within the country”.11
However, several challenges remain. There is limited analysis about
the nature and extent of corruption, or about ways to address it. This is
crucial because a lack of understanding and information have been major
factors in the ineffectiveness of international reforms. A senior UN
official from Vienna visiting South Africa recently raised the concern that
the anti-corruption strategy was being devised without comprehensive
baseline information. Donors could be asked to fund, for example, a
corruption survey. The challenge will be to ensure that established
researchers are included in such a project to collate existing, albeit limited
and fragmented, research activities on corruption to avoid duplicate
efforts. On the basis of such survey information, priority areas for
intervention can be mutually agreed upon.
In terms of process issues, sustainable anti-corruption reforms
demand a participatory process, which also promotes ownership,
involving all stakeholders. The National Anti-Corruption Summit,
convened in Parliament, made considerable progress towards addressing
this and broad representation. The Cross-Sectoral Task team continues to
reflect its commitment to inclusiveness. Sustained participation in these
initiatives depends not only on government, with donor support,
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
providing opportunities for cross-sectoral interaction but also civil
society and private sector actors need to demonstrate continued political
will by actively organizing, consolidating, and engaging their organiza-
tions in the process, requiring both leadership and dedicated resources.
Initiatives such as the South African Non-Governmental Coalition
(SANGOCO’s) Code of Ethics and Business South Africa (BSA’s)
adoption of the SANCODE code of business ethics are examples of two
areas for continued action.
Monitoring the current policy processes around corruption reform
falls mainly upon civil society organizations as government’s ability to
monitor itself, particularly around this issue, is often viewed with
suspicion. The Public Service Commission is establishing a monitoring
mechanism and is interacting with NGOs that are already doing work in
this area to devise a model. NGOs need to be empowered to play this role
as does the media by improving its investigative journalism. While the
importance of research is often undermined in favor of more tangible
service delivery outcomes, it is encouraging that funders such as the EU,
AusAid, Ford Foundation, and the Open Society Foundation currently
support anti-corruption/governance research initiatives through several
independent civil society organizations.12
Finally, South Africa has a plethora of statutory agencies to fight
corruption. There have been efforts to streamline these agencies’ focus to
increase their effectiveness. Comparative expertise from donor countries
on the nature and functioning of dedicated anti-corruption units in other
countries, as well as expertise in other areas such as legal instruments to
fight corruption, are important entry points for donor countries to assist
the South African efforts.
Assessing Funding Requests
Each of the Utstein partners (Netherlands, Norway, Britain, and Ger-
many) is currently engaged in development assistance to South Africa.
However, few projects directly support anti-corruption initiatives. Within
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the democracy and governance cluster, several projects promote public
service reform. Anti-corruption projects may become an explicit focus
area for donors once the national government designates corruption as a
priority assistance area.
Donors are already confronting the questions raised above. In terms
of the agreed minutes of the 1999 Annual Negotiations on Development
Co-operation between South Africa and Germany (7–9 September 1999)
the Public Service Commission (PSC) requested cooperation from GTZ
for a particular project dealing with the following areas:
• organizational development of the PSC
• anti-corruption initiatives
• development of an instrument for monitoring and evaluating
public service
• training for PSC staff
During March 1999, GTZ undertook a project appraisal in South
Africa. Conducted by two independent consultants, the appraisal was
based on interviews with representatives from the Public Service Com-
mission, other South African areas of government, organizations, and
NGOs. As a researcher working in the field, it was encouraging to be
approached for an opinion. The appraisal will conclude with a report for
GTZ recommending that the project should be established as proposed,
suggest changes to the proposal, or reject the project. The appraisal is in
progress and it will be interesting to see how the original project proposal
differs from the final agreement if it is approved.
In terms of measuring the effectiveness of proposed anti-corruption
reforms, the African experience suggests that sophisticated, well-timed,
and properly sequenced strategies will contribute to the governance
agenda that economic and political liberalization seeks to achieve. Donors
who are approached to fund such initiatives should pay attention to
questions of timing and sequencing, consistency, details and
sustainability, and the level of political commitment necessary to promote
and sustain reform in this area.13
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Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
Conclusion
Donor coordination in the field of anti-corruption activities is crucial.
Donors should understand the environment and context in which they
operate as well as the key issues. While donors would like a common,
coherent, and coordinated approach, using similar standards and criteria
when assessing development assistance in the field of anti-corruption, a
country by country assessment is crucial for appropriate aid intervention.
Institution building, both within the state as well as the strengthening of
civil society, is important.
Therefore, a recipient country’s ability to articulate its main objec-
tives in development assistance and fighting corruption is just as impor-
tant as donor coordination. Civil society actors should also coordinate
their anti-corruption activities. In this regard, a roundtable of South
African research organizations that work on anti-corruption issues will
convene with donors. The purpose of this meeting is three-fold: 1) to
understand donor priorities for anti-corruption assistance to civil society
2) to brief donors on NGOs’ anti-corruption activities and 3) to share
potentially new projects to control corruption in South Africa.
Fighting corruption links directly with President Mbeki’s vision of an
African Renaissance, designed to promote and strengthen systems that
will enhance governance on the entire continent. However, such vision, if
not given clear content, may become a meaningless vehicle of political
intent, devoid of concrete and realizable action. What is certain now is
that civil society organizations as well as the international donor commu-
nity will continue to engage the South African President in his pledge to
root out corruption.
Notes
1. Wheeler 1989, Bauer 1992, 1993 in G.S. Maipose, “Aid Abuse and
Mismanagement in Africa: Problems of Accountability, Transparency and
Ethical Leadership” in Corruption and Development in Africa: Lessons
from Country Case Studies, edited by K. Hope and B. Chikulo, 2000.
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2. M. Robinson, ed., Corruption and Development, p.2, Frank Cass:
London , 1998.
3. B. Cooksey, World Bank Discussion Group on Corruption, 2000
4. Defined as official resource flows from the international donor
community to South Africa in the form of grants, technical coopera-
tion and financial cooperation, where the South African government
is held at least partially responsible and/or accountable for the
management of such resources.
5. Documented in the Quarterly Report IDCC no. 2 1994.
6. G. S. Maipose, “Aid Abuse and Mismanagement in Africa: Problems
of Accountability, Transparency and Ethical Leadership” in Corrup-
tion and Development in Africa: Lessons from Country Case Studies,
edited by K. Hope and B. Chikulo, p. 97, 2000.
7. Ibid.
8. op. cit. p. 95
9. D. Brinkerhoff, “Identifying and assessing political will for anti-
corruption efforts” Working Papers – Implementing Policy Change,
USAID, No 15.1999
10. “Corruption: Integrity improvement initiatives in developing
countries”, United Nations Development Program.
11. Beth Hogan, USAID South Africa, interviewed for the UNDESA
survey on Ethics in the Public Service in Africa, November 1999.
12. These organizations include the Institute for Security Studies (ISS),
the Institute for Democracy in South Africa (IDASA) the Centre for
the Study of Violence and Reconciliation (CSVR), the Public Service
and Accountability Monitor (PSAM) and Transparency Interna-
tional—South Africa.
13. M. Robinson, ed., Corruption and Development, p.154-155: Frank
Cass: London, 1998
201
Terms of Engagement for Bilateral Donors: A South African Perspective from Civil Society
References
Chabal, P. & Daloz, J.P. 1999. Africa Works: Disorder as Political Instru-
ment.
Cooksey, B. 2000. World Bank Discussion Group on Corruption. Draft
Policy framework and procedural guidelines for the management
of official development assistance. Draft two, January 2000.
Kpundeh, S. 1999. “Corruption: Integrity improvement initiatives in
developing countries,” The United Nations Development
Programme.
Maipose, G.S. 2000. “Aid Abuse and Mismanagement in Africa: Problems
of Accountability, Transparency and Ethical Leadership” in
Corruption and Development in Africa: Lessons from Country
Case Studies, edited by Hope, K, & Chikulo, B.
Robinson, M .,ed. 1998. Corruption and Development: Frank Cass.
Van der Spuy, E, Geerlings, J. & Singh, A. 1998. “Donor assistance to
crime prevention and criminal justice reform South Africa, 1994–
1998.” Commissioned by the UN.
203
Terms of Engagement
Terms of Engagement:Towards Strategy andGuidelines for Donor-RecipientInteraction Against Corruption
Steven Langdon and Heather Baser
THIS PAPER EXAMINES THE QUESTION, “what terms of engagement should
bilateral donors develop in their relations with recipient countries?”
The focus is on the political process of donor-recipient interaction. It
argues that
• donors should move away from conditionality arrangements, and
stress engagements with recipient countries that are based on
performance rather than promises;
• country frameworks against corruption should be developed
through donor-recipient interaction and cooperation, stressing
local ownership and leadership in country-specific strategies;
• non-engagement and disengagement should be options chosen by
donors in circumstances where recipients’ initiatives are seen as
non-credible, local ownership is clearly absent, or agreed monitor-
ing benchmarks are consistently missed;
• within country frameworks, cooperative interaction should focus
around institution-building, wide incorporation of stakeholders,
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Langdon and Baser
joint monitoring processes, tracking the implementation of
oversight and transparency institutions, public service reform, and
priority funding and other support for anti-corruption agencies;
• continued donor support for civil society groups and regional
networks should be maintained at lower levels even where
disengagement takes place.
The overall thrust of the paper is that improved aid effectiveness
should be the goal that drives new donor approaches—not just the need
to rationalize donor agencies’ internal operations in response to tighter
financial circumstances.
Starting Perspectives
Considerable rethinking is taking place on the potential role of donor
financial aid in helping to alleviate poverty in poorer countries. In part,
this is because donor agencies recognize that tighter financial constraints,
which most now face, require making harder choices—the result of
donors seriously reconsidering the effectiveness of aid.
Collier, Dollar, and Lancaster, among others, present a new develop-
ment perspective that says donor aid is ineffective in shaping recipient
country policy, and, therefore, is ineffective in alleviating poverty particu-
larly when such policy is poorly directed. But aid can have quite signifi-
cant pay-offs in a positive policy context and should be concentrated in
such settings.1 On close inspection of the policy indicators they utilize,
their evidence looks convincing if perhaps a little too broad.
From this perspective, significant corruption is a key aspect of policy
failure and donors are likely to be ineffective in changing policies that
would fight corruption. Aid provided in such a context is wasted. But all
this could change. Aid that is coupled with a significant indigenous
change impetus could be very effective in supporting and strengthening a
reform process. Donor engagement, seen in this light, should respond to
meaningful recipient reform initiatives.
Work such as that of Isham, Kaufmann, and Pritchett underlines the
positive impact of open, participatory governance (as opposed to corrupt
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Terms of Engagement
cronyism) on economic performance, and on providing a setting where
aid efforts can contribute.2
Brinkerhoff,3 however, presents a somewhat different dimension to
this thinking by suggesting environmental and situational factors that
donors can review and sometimes support when analyzing a recipient
country’s political will to tackle corruption. Genuine reform initiatives
require local ownership in the anti-corruption fight, says Brinkerhoff, and
this is reflected in who leads in shaping local plans, the degree of analyti-
cal rigor evident in working out strategies, the extensive involvement of
local stakeholders, the application of tough and credible sanctions, and
the continuity of anti-corruption efforts. However, a crucial point
remains. Because donors can intervene to help reformist forces gain
information and analytical skills even before that broader political shift
takes place, aid should not be strictly focused in cases where the change
impetus is already under way.
Widespread agreement in recent literature asserts corruption is deeply
rooted and difficult to analyze. Brinkerhoff stresses that it is a complex issue
and “a challenging long-term undertaking.”4 Doig and Theobald conclude,
“corruption is a symptom rather than a cause of underdevelopment.”5
Their various case studies argue that accelerating globalization, combined
with reduced capacity of the state apparatus in many developing countries,
is widening opportunities for lucrative rent-seeking from extensive new
capital flows and is also reducing capacities to impose sanctions. From this
perspective, aid donors are unlikely to have an impact on corruption in
many cases except through “a program which addresses the fundamental
roots of economic backwardness and inequality.”6 Effective aid will have to
be thought through strategically even in the context of significant initiatives
specifically designed to counter corruption.
Towards an Engagement Strategy
There are, then, no easy and universal answers to the classic engagement
questions: How do donor countries have influence? Where is the point of
entry? What general strategy should be adopted and applied by donors as
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a group? But there are lessons that donor countries have been learning,
partly from the aid effectiveness debate, and partly from the experience of
sector-based programming.
The main lesson is that donor-led initiatives based on significant
conditionalities negotiated with recipient governments are now increas-
ingly viewed as ineffective. “After twenty years of experience,” conclude
Collier and Dollar, “we can say pretty clearly that conditionality has not
typically led to successful reform.”7 Jones recently summarized the
evidence: “a general consensus is now emerging that conditionality as it
has been applied under structural adjustment programs (ex-ante condi-
tionality in multi-tranche operations) has failed to bring about sustain-
able improvement in economic policies or institutions.”8
Recommendation One: Based on these perspectives, terms of
engagement against corruption should adopt alternatives to ex-ante
conditionality.
Analysts of conditionality and its effectiveness to address problems have
typically distinguished among project-based conditions such as counter-
part funding and accounting requirements; sector-based conditions such
as real resource increase commitments to a sector or policy area; macro-
economic conditionalities such as money-supply or fiscal balance levels;
and what some have called “level four” or cross-cutting, non-economic
conditionalities in the areas of governance, environmental norms, and
poverty reduction targets.9 The critique of ex-ante conditionality has
been especially influential in recent thinking about sector wide ap-
proaches to donor-recipient interaction. Given growing skepticism about
macroeconomic conditionality, there has been substantial questioning of
sector-based conditionality—with insights that are also relevant for level-
four concerns such as corruption.
As noted by Foster et al in a Dublin meeting paper, “there is no
consensus at sector level of the appropriate role of conditionality within
sector wide approaches, even though there is active discussion within the
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Terms of Engagement
donor community…It is difficult to strike a balance between stop-go
financing, and maintaining a credible threat [of sanctions] especially
where the dependence on donor finance is substantial.”10 Such consider-
ations have led to new forms of donor-recipient interaction at the sector
level, emphasizing what Foster et al describe as “support to policy analysis
and dialogue…the experience of joint working, rather than hard condi-
tions.” But in practice this has not been an easy process. It has depended
on the following:
• Donors seriously require recipient countries to demonstrate
“systematic and objective indicators of ownership,”11 so that
feasible and credible joint policies are established and imple-
mented for each sector.
• Donor recognition that a partnership approach and reliance on
dialogue are “not compatible with (sic) attempt to secure leverage
over policy”12 but should instead be aimed at consensus building
with a realistic view that this process is slow and uncertain.
• Donors committed to extending preparatory phases of sector
initiatives and adding components that build local staff ’s skills,
extend local consultative capabilities, and strengthen local institu-
tional structures. As a Danish analyst notes, “while conditionality
has generally failed, ex-ante capacity building can be used to a
limited extent, if aimed at strengthening the analytic basis for
policy making and broadening the involvement of stakeholders in
policy processes.”13
• Donors and recipients agree that “continuous interaction in a
joint process” is the goal that requires early and regular monitor-
ing of results, and that the quality of donor involvement during
implementation (and in interaction with various national
institutions) is crucial. As the analyst above notes, “donors could
help to develop instruments—such as participatory dialogues
and workshops assessing and debating policy options—that
involve all relevant parties in an effort to improve the analytic
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Langdon and Baser
basis of policy making, priority setting, resource allocation, and
other forms of decision making.”14
A recent experience in Nigeria suggests the immense importance of
this sort of approach. At the request of the new Obansanjo government,
the Ministry of Finance and the World Bank put into motion just exactly
that sort of continuous interaction in a joint process to try to reform
government procurement systems. Dozens of hard-hitting detailed
recommendations resulted, including depoliticizing tender boards and
easing customs clearance and handling procedures. World Bank officials
were excited by the process of interchange, but remained uncertain about
the likelihood of any action following quickly. However in practice,
Nigerian authorities have accepted nearly all the recommendations and
are moving to promptly implement them because they feel both a sense
of ownership in the process, and an urgency to counter corruption in
ways that are truly effective.
Country Frameworks Against Corruption
The Maastricht Conference most likely will result in a plan of action
against corruption. This plan should reflect the important lessons learned
from sector wide programming.
Recommendation Two: The plan of action should adopt a
country-by-country framework that
• reflects differences and particularities among recipient
countries
• stresses donor concentration in those recipient countries that
demonstrate ownership of an anti-corruption agenda and
seriously pursue it
• moves beyond interaction with national executives to
incorporate more governance institutions and civil society
groups in significant ways
• emphasizes joint working rather than conditionalities in a
partnership process of continuous interaction, stresses
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Terms of Engagement
cooperation in building local analytical skills and consultative
links, in a joint way, and underlines the importance of
detailed implementation and monitoring
What this recommendation suggests is that the heart of an action plan
must move toward a set of country-specific frameworks in which donor
groups develop broad-based, jointly pursued partnership approaches to
counter corruption. Differences in country frameworks should reflect the
varying specifics of corruption characteristics, degrees of local ownership,
local institutions and skill levels, character of cooperating stakeholders,
and the political/historical cohesiveness of given societies.
It is not always possible to work out country frameworks in a
credible way since they must be seen as serious joint efforts, meant to
achieve results that can be monitored. Otherwise, they represent one
more gesture that is ineffective en route to marginalizing many develop-
ing countries in a global economy.
The question at this stage is what guidelines for engagement can
make joint country frameworks really matter.
Guidelines on Credible Engagement
Some of the most important points to consider when constructing
country frameworks emerge from others’ experiences in developing anti-
corruption efforts as well as from engagement approaches used in other
contexts such as sector wide approaches.
Recommendation Three: Donors must be prepared to reject
engagement in country framework partnerships where recipient
governments’ initiatives are seen as non-credible and local owner-
ship is clearly absent.
Consistent with recognizing particularities and differences among
countries, and efficiently allocating limited donor resources, there are
clearly various country cases where significant donor assistance will not
effectively address corruption. These are cases of serious policy failure as
underlined by the work of Collier, Dollar, and Lancaster; or cases where
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underdevelopment and global pressures are so powerful (in Doig/
Theobald terms) that corruption is a symptom of much deeper imbal-
ances; or examples where political will is completely absent as in the
Brinkerhoff framework.
Donors should examine the credibility of a country’s political
commitment by reviewing
• the extent to which support for government action is widespread
and multi-leveled
• how deeply local analyses have probed the character of the
country’s corruption
• whether there has been extensive mobilization of varied
stakeholders
• whether enforcement initiatives have identified serious and
credible sanctions against corruption
• whether there is evidence of a continuity of concern about
corruption matters in government and among stakeholders
Negative conclusions on all these points should lead to a donor’s
refusal to engage whereas positive conclusions on several of these
significant political indicators should be an essential basis for establishing
a country framework partnership.
Recommendation Four: Country particularities should shape what
constitutes effective anti-corruption strategy in any given context
and determine how best to focus donor engagement.
Particularities matter. The emerging views in the literature clearly suggest
that country cases need to be examined carefully and separately so as to
evaluate policy stances, to analyze the environmental and situational
factors around political will, and to understand how globalization is
affecting a given context. Diagnostic surveys of varying countries’
corruption experiences are crucial, particularly service delivery surveys as
they probe the extent of effectiveness/ineffectiveness of different institu-
tions/ministries/agencies.
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Terms of Engagement
However, more broadly based surveys, focus groups, and local-level
research can also be very useful. For instance, they aid in identifying
national and other institutions that have high potential credibility in
leading anti-corruption efforts. Often there may be important lessons for
donors to use in shaping their approaches to ongoing dialogues, just as
there are for recipient country representatives.
Ghana offers very instructive insight in this regard. Leaders of
Transparency International, Ghana, which is based in Accra have
tended, for instance, to see district level governments as mere
creatures of the president with no local credibility and serious
problems of local financial abuse. But a recent detailed survey study
by the Institute for Electoral Systems (IFES), an independent U.S.
agency, found that these governments, on the contrary, were well
regarded by local civil society groups, active and quite efficient in
service delivery, and often a source of some strength in building
integrity.15 In the same way, many World Bank analysts (drawing on
experiences in Asia where parliaments tend to be drawn from
traditional political elite families and are rarely independent voices)
have tended to disregard the potential role of parliament in the
governance system of Ghana. But a 1999 survey of several thousand
Ghanaians in a national sample by U.S. universities and the Centre
for Democracy and Development in Accra, found that the level of
trust by Ghanaians was higher for Parliament (more than 74 per-
cent) than for the law, the courts, the police, the political parties, the
Electoral Commission, or traditional chiefs.16
These conclusions have led the Ghana Core Country Team (the
World Bank sponsored anti-corruption network in African countries) to
rely quite heavily on the Parliamentary Finance and Public Accounts
Committees as key institutions to brief and rely on in developing impetus
against corruption. This is in marked contrast to the situation in Tanza-
nia, for instance, where a late 1997 survey found that only 21percent of
respondents believed Parliament was “doing their best to reduce corrup-
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Langdon and Baser
tion in the country,” compared to a 49 percent rating for the President,
and 24 percent for the Cabinet.17
Recommendation Five: Donor partnerships with country frame-
work recipients must be based on clear signs of ownership and
political leadership on both sides, demonstrated by consistent close
interaction among broad groups of stakeholders, follow through on
agreed actions, and joint monitoring and adjustment of plans.
Assessment of ownership and recipient country leadership within a
country framework is inevitably at the heart of maintaining effective
strategies against corruption. These are not, however, easy concepts to
operationalize. As Foster et al note, “indicators used to assess ownership
include: Are government priorities backed by budget allocations? Who
within government has contributed to the development process? Staff at
several levels or just one? Has government gone through internal
processes to secure real commitment? Does the government produce
robust arguments when donor positions conflict with their views? Who
has endorsed the program? Parliament, cabinet, (the President)?”18 In
addition, this list should include an anti-corruption context—how
involved are other stakeholders such as civil society, business, and the
media?
Leadership assessment also needs to include a method to judge
consistency not just in determining political will (what Brinkerhoff has
called “the intent of societal actors to attack the manifestations and causes
of corruption in an effort to reduce or eliminate them”19 ) but in the
broader sense of leadership’s capacity to achieve results within a political
context, as reflected by a “(a) strong personal commitment to programme
goals; (b) ability to anticipate problems, flexibility in pursuing goals and
skills in bargaining; (c) political sensitivity to national and local aspects of
the programme; and (d) ability to hire good staff and inspire it to work.”20
This broad-gauged notion of political ownership or responsibility is
highlighted by the case of Tanzania. The 1995 election of President
Mpaka put someone in office with the political will to highlight corrup-
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Terms of Engagement
tion yet unable, in the aftermath of his election, to demonstrate real
ownership or responsibility in the anti-corruption fight. The Mpaka
Administration kept most senior political leaders whose integrity was
questionable. Understaffing continued in the Prevention of Corruption
Bureau so that years later only 44 of 130 positions were filled. The World
Bank concluded in 1998 that Tanzania did not meet “the credibility test
for application of a no-bribery clause in IDA-funded procurement.”21
These realities have also meant that the country framework in
Tanzania has started with more limited medium-term objectives. For
example, an effective review of the Auditor General reports is built by
what are still very weak parliamentary public accounts committees (in
contrast to situations in Uganda and Ghana with much stronger, more
active committees.)22 The limited staffing of Tanzanian anti-corruption
agencies means they lack credibility, and have been accused of being
major sources of corruption through their own operations.
Recommendation Six: Agreed monitoring indicators must be key
parts of frameworks, with wide identification and review of the
points to be assessed including
• ownership/leadership indicators as noted above
• tracking of the implementation of oversight agencies and of
sanctions applied, and
• regular review of transparency and accountability scorecards
Tracking indicators should be multi-faceted, broad-based, and reflect the
experiences of other countries. The Uganda case, for instance, is one
where corruption continues to be prevalent according to many observers.
But progress is suggested by (a) more condemnation of corrupt senior
office holders through parliamentary censure, for instance, supported by
active parliamentary committee investigations and media reports; (b)
growing numbers of police investigations resulting from the Public
Accounts Committee hearings; and (c) increased, though still inadequate,
enforcement and monitoring of the asset declaration requirements for
senior office holders.
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Recommendation Seven: Public service reform should be a priority
in country frameworks, with special attention to measures such as
merit recruitment, satisfactory pay scales, training, and internal
systems of monitoring and transparency.
Engagement discussions, in many cases, should pay considerable atten-
tion to reforming public service. This has been a key conclusion in many
countries that are initiating serious anti-corruption action. For example,
in Ethiopia the President’s Office led public service reforms; and in
Botswana the low perceived levels of corruption are associated with
changes in public service that include an emphasis on merit systems of
recruitment, quality training, and good salaries.23
Recent initiatives to tackle high levels of corruption in Indonesia
have also stressed public service reform. Indonesia, already plagued
with a poorly compensated public service that lacked merit-based
recruitment and established complex dependencies between senior and
junior civil servants, was weakened further in the 1980s and 1990s by
the rising cost of living in urban areas and the accelerating gap between
public and private sector wages.24 This country’s response was to
develop a national institutional review that initially includes an assess-
ment of the Indonesian civil service known for widespread bribes and
kickbacks in procurement practices.
The questions that will have to be asked in the Indonesian case about
engagement are, as suggested above, key political ownership and leader-
ship questions such as:
• Are reform commitments widespread and at how many levels of
Indonesian government?
• How many key stakeholders, including senior civil servants, are
involved?
• Has there been in-depth analyses examining the extent and
methods of corruption that have penetrated the country’s gover-
nance system?
• Have internal processes been undertaken inside state structures to
build commitment?
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Terms of Engagement
• Do key Indonesian leaders, including the military, have strong
personal commitments?
• Does the government have the political capacity and bargaining
skill to institute reforms?
• Does the government have the political sensitivity and roots in
local areas to maintain credibility on these issues?
• Will the government be able to attract and motivate good staff to
implement anti-corruption activities?
These are very difficult questions for the present political regime in
Indonesia and donors are justified in carefully considering the answers
before full engagement.
Recommendation Eight: Donors, in partnership with recipients,
should regularly examine implementation and other measures
associated with aid delivery to avoid contributing indirectly to
corruption pressures via their impact on existing incentive systems.
This recommendation relates to reform areas such as public service and
suggests that donors must carefully monitor internal operations, especially
policy area initiatives in recipient countries. These activities should be
assessed to ensure that implementation procedures designed to solve public
service problems do not have negative effects with respect to corruption.
The case of Tanzania is a particularly disturbing example of a donor-
sponsored initiative, which created special project units where public sector
workers had, inter alia, greater access to higher salaries and privileged
training. The incentives to these units effectively worsened already declining
morale and integrity standards in the entire Tanzanian public service.25
Recommendation Nine: The success of country frameworks in
abating corruption depends upon ensuring that integrity goals are
cross-cutting priorities within a competing context of scarce public
resources.
Anti-corruption efforts are fundamental concerns that should not be
undercut in major ways by a country’s other development priorities. In
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Langdon and Baser
Uganda, for example, the President highly regarded surveys that revealed
Ugandans think unacceptable corrupt practices are prevalent. Diversion
of many important social resources in health, education, and agricultural
extension is common. As a result, significant institutional reforms were
initiated including mandatory public disclosure of senior office holders’
personal assets; institutionalization of the Inspector General of Govern-
ment (IGG) as the monitor of public disclosure and other integrity
points; and revitalization of several parliamentary public accounts
committees (with slightly different mandates) to pursue financial abuses
in government expenditures. Despite this leadership, there has been only
limited improvement in the prevalence of corruption according to the
IGG.26 His office maintains that extremely limited resources make it
impossible to adequately monitor the annual asset declarations of 2000
office holders, and prevents the opening of district-level IGG offices
despite the shift of much of the financial authority to these local levels.
These financial constraints seem to result from international
financial institutions stressing the importance of two other priorities in
Uganda: (1) divestiture of public companies, which has been a source of
various corruption cases and (2) severe restraints on public expenditure,
which secure Uganda’s compliance with the Heavily Indebted Poor
Countries Initiative (HIPCI) performance standards for three years and
permit significant International Financial Institutions (IFI) debt forgive-
ness. No one would want to make the case that the HIPCI goal is not an
essential priority. But a country framework against corruption has to
emphasize the very high importance of making anti-corruption agencies
effective if this issue is to achieve central significance.
Recommendation Ten: Anti-corruption agencies that are ad-
equately funded with strong leadership and the independent capacity
to launch prosecutions are crucial parts of successful integrity strate-
gies, and must be financially safeguarded as fundamental priorities.
Botswana’s relative anti-corruption success, for instance, demonstrates
the great importance of a well-funded Directorate on Corruption and
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Terms of Engagement
Economic Crime (DCEC), which is a marked contrast to the IGG’s
problems in Uganda and the understaffing of the Prevention of Corrup-
tion Bureau in Tanzania.27
Successful anti-corruption agencies also depend on effective over-
sight institutions, oftentimes created by independent parliaments and
their committees. In the case of Ghana, and unlike Uganda, the Finance
Committee reallocated the budget to finance district offices for the
primary independent anti-corruption agency, the Commission on
Human Rights and Administrative Justice (CHRAJ).
Disengagement and Non-Engagement
Beyond engagement guidelines, other questions that should be confronted
are: What can be done to lessen disbursement pressure in cases where
disengagement is justified because agreed targets are consistently missed
and ownership/leadership tests are failing? Are there lower-intensity
methods to sustain a useful role in non-engagement/disengagement cases?
Are there behind-the-scenes to support anti-corruption actors?
The basis for disengagement from country frameworks should be
considered within a regional context. Thus, ending support for a national
action plan should be discussed within a broader African context, so that
disbursement pressures are minimized. Disengagement with a failing
African country, for example, could, today, be explained within the
context of potentially useful engagement with Nigeria, given the restora-
tion of a viable set of activist legislative committees now exercising
serious oversight. Breakdown of partnership arrangements due to a
failure to meet monitoring targets should also be assessed within the
context of regional economic and other pressures.
There is a strong case for continuing engagement with civil society
groups where inadequate conditions exist for a country framework
against corruption. Poor governance in Bangladesh prohibits donor
engagement, given widespread bribery, a breakdown of trust across
stakeholders within the state sector, ineffective oversight institutions such
as the Public Accounts Committee, and the open acknowledgment of
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Langdon and Baser
illegal campaign actions by key legal leaders such as the Minister of
Justice. Yet the civil society institutions in Bangladesh are among the most
active and effective anywhere in the world, especially the work with poor
women by the Grameen Bank and other micro-credit organizations.
Donor support to Transparency International, Bangladesh helps to keep
anti-corruption concerns on the public agenda and lays the groundwork
for potential donor engagement in future reforms.28
Long-term considerations should be particularly underlined in the
complex context of anti-corruption efforts. In Tanzania, for instance,
donor support in the early 1980s for the Economics Department of the
University of Dar Es Salaam through the International Development
Research Council has produced key anti-corruption results years later.
Various Tanzanian economists, who were trained thirty years ago, now
work in Tanzania with the World Bank, or are in parliamentary positions
where they are advocates for anti-corruption legislation and activities.
Behind-the-scenes activity is possible in diverse ways. Work through
international institutions like the United Nations, or through regular
diplomatic missions, may both represent approaches that donors can use
to keep abreast of countries’ changing circumstances, so as to track the
potential for engagement or for limited initiatives such as study missions
or workshops. However, a more unusual and significant initiative in the
African context is a network of parliamentarians, the African Parliamen-
tarians Network Against Corruption (APNAC). APNAC has moved from
its initial phase as a regional workshop into a serious player, building
continent-wide ties against corruption. Using limited external funding
and internet connections, it has cultivated relationships with members of
parliament from certain problem countries such as Kenya and Zimbabwe
as well as with other parliamentarians from countries where more
credible anti-corruption efforts have been instituted such as Ghana,
South Africa, Benin, and Uganda. The organization has its own website
[www.apnac.org] and is continuing to build support for reform through-
out Africa. Recently, for example, APNAC sponsored an anti-corruption
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Terms of Engagement
workshop in Tanzania prior to this year’s elections to encourage a
political focus on reform strategies. It also initiated interaction with the
National Assembly of Nigeria and Transparency International, Nigeria to
examine a code of ethics for public office holders.
Less institutionalized networks of parliamentarians have formed in
South Asia and South East Asia that have facilitated ongoing connections
between political leaders are undertaking credible efforts against corrup-
tion such as Senator Pimental, Chair of the Senate Blue Ribbon Commit-
tee Against Corruption in Philippines and members of parliament in
countries where anti-corruption activity is more difficult to sustain, such
as Cambodia, Malaysia, Indonesia, and Bangladesh.29
The question of linkage must also be considered in this context. Are
there cases where the breakdown or non-viability of a country framework
against corruption should lead to donor disengagement across the broad
range of development assistance areas? It is likely that such cases exist
such as the Congo-Zaire under Mobutu but what criteria for disengage-
ment should donors use?
Conclusion
There is an overall implication of this paper. There are two broad reasons
why donors may wish to come together to assess anti-corruption strategy.
One is to prepare common approaches, which provide better coordina-
tion of activities, more careful divisions of efforts, and more effective
allocation of scarce resources. The other broad reason could be to shift
strategy and develop the basis for common thinking and analyses would
permit genuine partnership with aid-recipient countries. Such serious
partnerships would involve more country-by-country diversity in
approach, more serious engagement in continuous interaction, and more
complexity for donors as they move forward in differing ways with varied
monitoring targets and responsive agendas.
The analysis of aid effectiveness suggests that the second reason
should be stressed in discussions and recommendations. Performance,
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Langdon and Baser
not promises, should be the focus, which explains the focus of this
paper—a partnership strategy based on local ownership and recipient
leadership. This may represent more complexity, but it also seems to be
the route to more successful results.
Notes
1. Paul Collier and David Dollar, “Target Aid to Performance not
Promises,” Development Outreach World Bank Institute, Fall, 1999,
pp. 18–21; Carol Lancaster, “Aid Effectiveness: The Problem of
Africa,” Ibid., pp. 22–24; see also Paul Collier and David Dollar, “Aid
Allocation and Poverty Reduction,” World Bank Development
Research Group paper, Oct. 20, 1998.
2. Jonathan Isham, Daniel Kaufmann and Lant Pritchett, “Civil
Liberties, Democracy, and the Performance of Government
Projects,” The World Bank Economic Review, 11:2, 1997, pp. 219–240.
3. Derek Brinkerhoff, “Identifying and Assessing Political Will for Anti-
Corruption Efforts,” Working Papers—Implementing Policy Change
(USAID,) No. 15, Jan. 1999.
4. Brinkerhoff, op. cit., p. 2.
5. Alan Doig and Robin Theobald, ed., Corruption and
Democratisation, Frank Cass: London, 2000.
6. R. Theobald, “Conclusions: Prospects for Reform in a Globalised
Economy,” Ibid., p. 157.
7. Collier and Dollar, Development Outreach, p. 20.
8. Stephen Jones, “The Conditionality Debate: Implications for
Bilateral Donor Support for Sector Programmes,” Interim Report on
a DANIDA Study, prepared for Dublin Seminar on Sector Wide
Approaches, Dublin, Feb. 8, 2000, p. 6.
9. Ibid., p. 2.
10. Mick Foster, Andy Norton, Adrienne Brown and Felix Naschold, “A
Framework Paper for the Meeting of the Like-minded Donor
Working Group on Sector Wide Approaches,” Paper for Ireland Aid,
221
Terms of Engagement
Dublin, Feb. 8-10, 2000, section 3.5.1.
11. Jones, op. cit., p. 10.
12. Ibid., p. 11.
13. O. Therkildsen, P. Engberg-Pedersen and J. Boesen, “Aid Policy and
Practice: Sector Support — From Policy Making to Implementation
Processes,” Issue Paper, Centre for Development Research,
Copenhagen, August, 1999, p. 5.
14. Ibid., p. 6.
15. Stephen Snook et al, “Civil Society in Twenty Districts in Ghana:
Surprises and Results,” IFES Paper, 1998.
16. Popular Attitudes to Democracy and Markets in Ghana: Survey
Report, CDD: Accra, Report No. 2, Nov. 1999, figure 11.
17. Quoted in Tanzania: Report of a World Bank Anti-Corruption
Mission, World Bank, Africa Region, April 8, 1998, p. 6.
18. Foster et al, op. it., section 2.1.
19. Brinkerhoff, op. cit., p. 3.
20. Therkildsen et al, op. cit., p. 9.
21. Tanzania: Report of a World Bank Anti-Corruption Mission, p. 25.
22. See evidence of this in the Tanzanian anti-corruption strategy
summary prepared for the Durban conference in South Africa,
October 1999.
23. See R. Theobald and R. Williams, “Combating Corruption in
Botswana: Regional Role Model or Deviant Case,” in Doig and
Theobald, ed., op. cit., pp. 127-8.
24. Bruce Bailey, “Corruption in Indonesia,” CIDA Working Paper,
Ottawa-Hull, February 2000.
25. This point is made explicitly in Tanzania: Assessment of the Capacity
Building Impact of the World Bank Portfolio, Capacity Building
Technical Unit, Africa Region, World Bank, Oct., 1997, pp. 37-38.
26. See David Watt et al, “Democratisation or the Democratisation of
Corruption? The Case of Uganda,” in Doig and Theobald, ed., op.
cit., p. 55ff.
222
Langdon and Baser
27. See Theobald and Williams, op. cit., pp. 119-126ff.
28. An example of such involvement is outlined in Transparency
International–Bangladesh, “Plans & Programs: Towards New
Millennium,” Dacca, 1998.
29. More information on these various parliamentary network initia-
tives against corruption is available on the website of the Parliamen-
tary Centre, in the context of discussions of the annual Laurentian
Seminar sponsored by the World Bank Institute, CIDA and other
donor agencies. See [http://parlcent.parl.gc.ca].
223
Best Practice Guide and Bad Practice Warnings
Best Practice Guide andBad Practice Warnings
Glynnis Davies
ATTAINING BEST VALUE FOR MONEY is a key procurement objective for
international development. This guide emphasizes good practice, which
we define as those methods and processes that improve value for money
by (1) eliminating inefficiency, (2) reducing corruption, and (3) improv-
ing effective procurement.
This guide’s intended purpose is to be an aide memoir for officers who
need to review procurement practices in the field. It is not meant as a
substitute for a comprehensive audit, but highlights potential problem areas.
This guide summarizes some of the key best and bad practice aspects
of government-funded procurement. Section A establishes some key
principles, followed by Section B, which is a guide to generally applicable
good/bad practices and Section C is a checklist.
Section A: Key Principles
1. The objective is best value for money. Best value for money is the
optimum combination of whole life cost and quality that meets
the customer’s requirement.1
224
Davies
2. Inefficiency and corruption are the enemies of best value for
money. Best practice procurement motivates all parties to search
for the best way to achieve best value for money and this search
can, if pursued, resolutely eliminate both inefficiency and
corruption.
3. Corruption is bad for business. “Corruption distorts the opera-
tions of markets and deprives ordinary people of the benefits
which should flow from them.”2
4. Open decisions are usually the best decisions. Transparency
means creating a decision-making process that is open to the
participants3 and to subsequent audit. Documented records
capable of peer and lay evaluation should be maintained at all
decision-making stages. They do not have to be long but they
must be clear.
5. Separation of duties is essential. The person requiring a purchase
must be a different individual from the person placing an order
or contract and the payment must be made by yet another
individual.
6. Never hid in teams. Teams are a proven exceptionally effective
means of delivering high quality outputs. Unfortunately, they can
often be used to obfuscate responsibility. People with procure-
ment responsibility4 are personally accountable and must not sign
joint reports that are part of the procurement process without
also stating (in writing) their own professional opinion on the
supported matters.
7. Use the simplest solution(s). Needless complication creates
inefficiency and more opportunities for corruption. Fast, simple
solutions administered by the best quality personnel are usually
more efficient and less corrupt than many checks and controls.
225
Best Practice Guide and Bad Practice Warnings
Section B: Generally Applicable Good and Bad Practices
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
tcejor
p/deifit
nedi
deeN.1
noit
pecni
,tcejorpafo
esoprupdna
epocsehT
dna,margorp,tegdub
sti.dediced
eraygetarts
tnemerucorp
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mot
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eniunegro
stsixeyleniuneg
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tcudorpdne
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eB•
niahc
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tpeccA.ssecorp
.egnellahctuohti
wsniahc
ylppus
DC
B
eulavtseb
tegot
ezisegakcap
ediceD
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'gnildnub'ro
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senorella
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rofegral
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gnicalP•
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mocsesaerced(
tekram
)eruliaffoksir
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ksa(secafretni
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dna)'?tso
mstifeneb
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ronim
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EB D
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meganaM
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elpoepyb
krow
maetdoo
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tnednepednirieht
ekam
drawot
gnikrow
elihw
raelcnoinipo
.slaogno
mmoc
ottneivresbus
tnemegana
M•
pihsredaelcitarcotua
denifedton
seituD
•ro
ytilibatnuoccalaudividnI•
sdraobfoesu
ybdediova
snoisicedseetti
mmoc
dna
ED
CB
SLEVEL
KSIR
ytteP:duarF—D;ksiR
noitpurroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacilppa
yllareneg,ecitcarptseB—
A:.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiRnoitpurro
C
226
Davies
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
noit
pecni
tcejor
p/deifit
nedi
deeN.1
)deu
nitn
oc(ygetarts
tnemegana
mtcartno
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mtseb
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ygetartstne
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sitah
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mandnarb
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tnemerucor
peht
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tub(lanoitutitsnI—E;ksiR
227
Best Practice Guide and Bad Practice Warnings
ssecorptnemerucorp
niegatS
ecitcarptseBecitcarp
daBksiR
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gnirongi•
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tsilsreilppus
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tuohtiw
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dAssecorp
evititepmoc
reporpD
B
fitekra
mytido
mmoc
niesahcruP
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tekram
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mton
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DB
ssecorpyriuqnE.4
-redneTot
noitativnI(yriuqne
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eraperp
rerednetrehto
ro'tnanetgnittis'
eviG
egdelwonk
tceridhti
wsdeenruoyfo
srehtoevig
otgniliaf
ybegatnavda
narednet
eraperpot
emit
etauqeda
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llaerusne
otnekat
eractaer
Gdna
sliatede
masevah
srerednetseitinutroppo
roero
mnevig
srerednetlaudividnIsrehto
nahtnoita
mrofnitnereffid
DC
B
SLEVEL
KSIR
noitpurroC
ytteP:duarF—D;ksiR
noitpurroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacilppa
yllareneg,ecitcarptseB—A:
.noitpurroc)lagelli
tontub(lanoitutitsnI—E;ksiR
228
Davies
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
)deu
nitn
oc(ssec
orp
yriuq
nE.4lla
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etistisiv
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ot
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ecnatsissarehto
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s'reredneta
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pochti
wgnitir
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weussi
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mite
masta
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’srerednetsrerednetlla
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aylla
mron(tcatnocfo
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merucorp
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mitdna
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polia
mlamron
sataerT
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SLEVEL
KSIR
noitpurro
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D;ksiRnoit
purroC
dnarG:duarF—
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ppa
yllareneg,ecitcarp
tseB—A:
.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
229
Best Practice Guide and Bad Practice Warnings
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
)deu
nitn
oc(g
nine
po
red
neT.5rednetla
mrofni
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ninep
O)
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liamla
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deviecerneh
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OD
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ninep
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liamla
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deviecerneh
wnep
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fi(sliated
yekdna
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A)
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dexedninu,fael-esoolni
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tnemssessa
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oD
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ehtD
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seitudfonoitagerges
reporperusnE
lacinhcetelbatnuocca,de
manhti
w-oc
sreciffotne
merucorpdna
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yltnednepednignissessa snoitca
gnidnem
mocerdna
ylevitcelloceetti
mmoc
tnemssess
Aseka
mdna
srednetseni
maxe,lanosrep
tuohtiw
noitadnem
mocerytilibatnuoccalaudividni
DC
B
htiw
tcatnoC:noitaulave
erofeBseussi
ronim
yfiralcot
ylnosreddib
htiw
gnitirw
nidedrocerfi
dnatne
merucorpdnalacinhcet
aesu
tseB.tneserpsevitatneserper.eriannoitseuq
detcatnocsreddiB:noitaulave
erofeBgnitee
mrof
evitatneserperelgnis
yb.drocer
deifirevon
siereht
hcihw
rof
DC
B
SLEVEL
KSIR
noitpurroC
ytteP:duarF—D;ksiR
noitpurroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacilppa
yllareneg,ecitcarptseB—
A:.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
230
Davies
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
)deu
nitn
oc(t
nemssess
A/n
oitaulavE.6hti
wtcatno
C:noitaulaveretf
A.seussi
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qa
esutseB
tnemerucor
pdnalacinhcet
tatneser
peb
tsum
sevitatneserper
.sgniteem
yna
detcatnocsreredneT:noitaulave
retfA
gniteem
rofevitatneser
perelgnis
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deifirevon
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hcihw
rof
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noitcasdne
mmocer
noitaulavelaniFdnalacinhcet
ybdengis
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sreciffotne
merucorp
stnem
mocnettir
wtnedne
pedniesi
wrehtoro
trop
pusrieht
gnitacidni.laso
porp
ehtrof
sreciffotne
merucorp
dnalacinhceTeka
mro
troper
dengisnuecudor
p.noitadne
mmocer
tnioj
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stcartnocevitisnes
roeulav
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draw
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ppus
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purroC
dnarG:duarF—
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mdaB—B;elbacil
ppa
yllareneg,ecitcarp
tseB—A:
.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
231
Best Practice Guide and Bad Practice Warnings
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
yllarene
G.8
dooggnitceffa
srotcafrehto
emoS
serudecorp
tnemerucor
p
nisegatslla
tadet
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peht
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peksi
noitamrofnI
otdeen‘laicifitra
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ppa
selur’
wonk
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foelbaliava
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nosaereht
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ondna
some
mdetro
ppusnu
noitacifirevtnedne
pedniwolla
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noitcare
porp
taht
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ebdluohs
gnipeekesuoh
eciffO
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htiw
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p
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SLEVEL
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ppa
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tseB—A:
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tub(lanoitutitsnI—E;ksiR
232
Davies
Section C: Questions
The following questions are intended to assist anyone seeking to make a
judgement on the effectiveness of a procurement system or a procure-
ment action (such as an individual contract). Some answers can be
satisfactorily resolved by asking questions of the participants in the
process, but others need an examination of the relevant papers and before
drawing a conclusion. These are not meant to be substitutes for a full
procurement audit, but help to highlight areas that need attention or an
in-depth audit. Table C1 consists of general questions relating to both
systems and individual procurement, while Table C2, is more specific to
individual procurement actions.
noitseuQ :rofgnikooleraewtahW
tnemeganamdnapihsredaeL
.1 pihsredaeL dnalevelpotaerehtsIreganamlaitneulfni
tsebfoesuacehtgninoipmahc?tnemerucorpecitcarp
otlevelpotehttatroppuSdnaytivitcaeulavtsebetadilav
lavorppa’lacitilop‘edivorp
.2 tneilcdemrofninA yekyrevenisredaelerehterAfoelbapacertnectegdublacitircehtgnidnatsrednu
?seussitnemerucorp
ecnedifnocevahohwelpoePot)egdelwonknodesab(
dnaecitcarpdabegnellahctsebfotnemniattaehttcerid
ecitcarp
.3 noissiM neesdnadenifedeulavtsebsIgniyubllafosucofehtsa
?ytivitca
tsebrofnoissapa“(sohtenAetavitomlliwtaht)”ecitcarp
lanoitpecxeotstnapicitraptroffe
.4 gniknihtcigetartS sffatstnemerucorperAnisbojriehteesotdegaruocne
?smretcigetarts
esoht,.e.i,snoituloscigetartSerasevitcejboyeknosucoftaht
,elbaniatsusebotylekiltnatsiserduarfdna,evitceffe
.5 niahcylppuStnemeganam
notupgniebsisisahpmetahWdnatnemeganameht
ylppusrettebfotnempoleved?sniahc
ylppustpeccaotlasuferArognolrevewoh(sniahc
erataht)eganamotxelpmoctneiciffeni
Table C1: Systems and Individual Procurement
233
Best Practice Guide and Bad Practice Warnings
noitseuQ :rofgnikooleraewtahW
scihtE
.6 yciloP ?ycilopscihtenettirwaerehtsI sitahtyciloplacitcarpAelpoepllaybot’nodengis‘
devlovni
.7 erutluC saneestnemerucorpdoogsIehthtiwsngilatahtytivitcana
ehtfosevitcejbolaicos?stnapicitrap
eulavtsebdnatnempoleveDeratahtsevitcejboyenomrof
tnaveleryllarutluc
.8 ssennepO dessucsidsrettamlacihteerA?ylnepo
nispahrep,noissucsidnepOytilauqfotxetnoceht’selcric‘tnemevorpmi
seitilicaF
.9 eciffO gnipeekesuoheciffosI?tnellecxe
ylisaeerasrepaperehwseciffOehttuohtiwrohtiwdetacol
ralugerehtfoecneserpstnapucco
.01 secapseciffO ecapseciffoehtsiwoH?dennalp
nepodenilpicsidylbareferPsedargllarofseciffonalp
.11 sesimerP eciffoehtotsseccasahohW?saera
edifanobdnaffatsylnOnodewollasrotcartnoc/srotisiv
sesimerp
serudecorP
.21 seluR selurtnemerucorpehterAgnikrowekamotdengised
?tluciffidmehtdnuor
ssecxegnitaerctuohtiWtnemerucorp,ycarcuaerub
.kaewebtondluohsselur
.31 ycnerapsnarT rofsnosaerehterAsnoisicedtnemerucorp
foelbapacdnadetnemucod?sweivernoitcatsop
liatednisnoitanalpxEehtfoelacsehtotetairporppaotnettirwsyawla,tnemerucorp
ottsilaiceps-nonawollasnoisicedyekdnatsrednu
.41 seitudfonoitarapeS fonoitarapesreporperehtsI,demanhtiwseitud
dnalacinhcetelbatnuocca?sreciffotnemerucorp
gnitarepoocsreciffodemaNtub yltnednepedni gnissessa
snoitcagnidnemmocerdna
.51 foytilibatnuoccAslaudividni
,sresu(sreciffolaudividnierAtnemerucorprolacinhcet
yllaudividni)sreciffo?snoitcariehtrofelbatnuocca
dnasnoitcayfitsujohwsreciffOnA(.ylgnidroccangis
erutangislavorppadeifitsujnuehtsselnuetauqedatonsi
ehtmorfraelcetiuqsinosaer).txetnoc
234
Davies
noitseuQ :rofgnikooleraewtahW
)deunitnoc(serudecorP
.61 otgniylppaseluRdnaslenap
seettimmoc
ottneserpslortnocerehterAsnoisicedeettimmoctneverp
gnivomerfosnaemagnieb?ytilibisnopserlaudividni
llaotnwonkselurraelCdnasrebmemeettimmoc
dewollofsyawla
.71 ssecorpyranilpicsiD ,seitudriehtfoerawaffatssIdna,snoitcariehtrofdeenehtyranilpicsidottcejbusyehterafoesubaotlanoitroporpnoitca
?serudecorpeht
yllufdnadetnemucoD.serudecorpdootsrednu.noitacilppafoecnedivE
lortnocdnatiduA
.81 tiduatnemerucorP tnemerucorpdeniarterehterAnahtiwelbaliavasrotidua
tidualanretnitnednepedni?noitcnuf
fotnednepednielpoepdeniarTnoitcnuftnemerucorpeht
.91 tiduaeulavtseB tsebenimaxesrotiduaoDllewsaseussiyenomrofeulav
?tnemeganamsimlaicnanifsa
foelbapacrotiduArofeulavtsebgnigaruocne
dnatsrednuyllufdna,yenomssecorptnemerucorp
.02 ?ssecorpehtfotraP fotraptnemtrapedtiduaehtsI?ssecorplavorppaeht
morfetarapeselors’rotiduA:etoN(ssecorplavorppaeht
noesivdayamtiduAserudecorpfonoitaterpretni
tontub,.cte,ecitcarptsebdnalavorppaehtfotrapsa
)ssecorp
.12 srepeeketaG ytrapdrihtrofselorerehterAtsohehtnisrepeeketag
?noitazinagro
drihtdetsurt‘foesuehTstnegatnemerucorpsa’seitrap
ehtfosrebmemsaroyam,.cte,slenaptnemssessa
etairporppaeb
elpoeP
.22 noitcelesffatS tnemtimmocrofnesohcffatssIsaytsenohdnasevitcejboot
?laitnetoplacinhcetsallew
ewelbapacyllacinhcetehtfOtsomesohtgnikeesera
tsebeveihcaotdetavitomeulav
.32 gniniarT tegotemmargorpaerehtsInaotdeniartffatstnemerucorp
lanoisseforplanoitanretni?dradnats
tnelaviuqeroSPIC
235
Best Practice Guide and Bad Practice Warnings
noitseuQ :rofgnikooleraewtahW
)stnatlusnoC(srosivdA
.42 noitceleS troppusotnesohcsrosivdaerAriehtfosevitcejboyekeht
?stneilc
ewelbapacyllacinhcetehtfOtsomesohtgnikeesera
tsebeveihcaotdetavitomeulav
.52 ecitcarptseB lliwohwthguossrosivdaerAsecitcarptsebetomorpylevitca
?noitpurroctabmocdna
otcitsaisuhtneerasrosivdAeradnasecitcarptsebetomorp
tabmocotdettimmocnoitpurroc
.62 ecnamrofreP rofdedrawersrosivdaerA?ecnamrofreplanoitpecxe
dnatsrednuotelpmiSgnidrawersevitnecni
slaoggnirettebrotnemniattatneilcybtes
.72 yticapaC dliubotdeenaerehtsIgnomasaeraesehtniyticapac
?srosivdaeht
niahcylppusevitcAevorpmiottnemeganam
eulav’srosivda
Table C2: Individual Procurement
noitseuQ :rofgnikooleraewtahW
deifitnedideeN
.1 deeN ehtrofdeenlaeraerehtsI?tnemerucorp
sdeenetairporppanAronimroffeirb(noitacifitsuj
regralrofdeliated,smeti)stnemerucorp
.2 ezisegakcaP egakcaptnemerucorpehtsI?tekramehtrofezisthgireht
otdesimitpoegakcapfoeziSyticapactekramdnadeenhtob
.3 ygetartstnemeganaM rofmetsyss’tneilcehtsItnemerucorpehtgniganam
?evitceffetsomeht
etairporppatneiciffenAybdecneulfniton,metsys
’stseretnidetsev‘
.4 ninekatsiecivdalanretxefItisi,ygetartsgnidiced
s’tneilcehtniylbanoitseuqnu?tseretni
morftifenebnacrosivdafItsumti,tneilcotnevigecivda
tonsahsihttahtraelcebehtfoerutanehtdecneulfni
ecivda
236
Davies
noitseuQ :rofgnikooleraewtahW
)deunitnoc(deifitnedideeN
.5 ecruosertekraM ygetartstnemerucorpseoDtekramfoesutsebekam
dnatnatlusnoc,tneilc(?secruoser)reilppus
saelbaliavasitahwfoesutseBdesopmicialumrofotdesoppo
seigetarts
.6 dohtemtnemyaP dohtemtnemyapehtseoDdnareilppusetavitomtseb
?tneilctcetorp
snoitpofosnoitaredisnoC,stegrat,seludehcs,muspmul(
laicremmocrehtodna).ctesrotcaf
noitacificepS
.7 ylppusfonoitpircseD nettirwreporpaerehtsI?noitacificeps
)elbissopsafeirb(raelCnoitpircsed
.8 sisaB ecnamrofreproliatedtisI?desab
desabecnamrofrepylbareferP
.9 snoitcirtseR tcirtserylirassecennutiseoD?sreilppus
,sessecorp,semandnarboNtnadnuder,nigirofoecalp
.cte,sdradnats
.01 sessecxE detseuqergnihtyrevesI?dedeen
’gnitalpdlog‘oN
srerednetgniyfitnedI
.11 stsilredneT detaerctsilrednetehtsIecitcarptsebagniwollof
?ssecorp
3noitceS,BelbaTeeS
.21 skrowemarF aerehtsi,krowtaepersisihtfI?tcartnockrowemarf
ebdluohsereht,krowtaeperfItnemegnarrakrowemarfa
ssecorpyriuqnE
.31 emiT sdoirepemitelbanosaerevaH?dewollaneeb
wollaotdedivorpemithguonEsksirdnatsrednuotrerednet
redneteulavtseberaperpdnafisdoirepDRBIroUE(
)elbacilppa
.41 ytinutroppolauqE emasevahsrerednetllaoD?seitinutroppodnasliated
noitamrofniemassahenoyrevEnevigton’stnanetgnittis‘dna
ruovaflaiceps
.51 stnemucoD emasdeussistnemucoderA?srerednetllaotyad
eussiyademaS
237
Best Practice Guide and Bad Practice Warnings
noitseuQ :rofgnikooleraewtahW
)deunitnoc(ssecorpyriuqnE
.61 stisiv/gnifeirB ybdefeirbyllufsreredneterAfi(ytinutroppognidivorp
rofdnaetistisivot)tnaveler?)dedeenfi(gnifeirbdeliated
emaseviecersreddibllAtagnifeirb/tisiv,.g.e(gnifeirb
)sreddibllarofemitemas
.71 snoitseuQ snoitseuq’sreredneterAgnitirwniyltpmorpderewsna
?srerednetllaotseipochtiw
srerednetllaotdnatpmorP
.81 fotniopelgniStcatnoc
fotniopelgnisaerehtsIayllamron(tcatnoc
htiw)reciffotnemerucorpsnoitasrevnoclladnasrerednet
?deton
tpeksdrocerdnanosrepelgniS
gnineporedneT
.91 -non(sdibdelaeS)krowemarf
ybdeviecersdibdelaeserA?emitdnaetaddeifiton
sdibdetimilemit,delaeS
.02 -non(sdibetaL)krowemarf
denrutersdibetalerA?deneponu
erudecorplamronsagninruteR
.12 -non(ytiruceS)krowemarf
dnaerucestpeksdiberAemitgninepolitnulaitnedifnoc
?ecalpdna
ssecorperuceS
.22 hgih(gninepolamroF)eulav
nirocilbupnideneposdiberA?lenapgnineporednetlamrof
ssecorplamroF
.32 wol(gninepolamroF)eulav
lamrofnideneposdiberA?lenapgnineporednet
ssecorplamroF
.42 tnemecnuonnacilbuP)eulavhgih(
fi(sliatedyekdna)s(ecirperA?sreddibllaotdecnuonna)yna
tnemecnuonnalamroF
.52 sdrocersredneT nideedrocersredneterArednetdexedniytiruces
?retsiger
ytirucesdeniatniamaerehtsI?retsiger
noitaulavE
.62 airetirctnemssessA deifitonairetirctnemssessaerA?redneTotnoitativnIni
srerednetwollaotairetircraelCtneilctahwyltcaxeeesot
stnaw
238
Davies
noitseuQ :rofgnikooleraewtahW
)deunitnoc(noitaulavE
.72 sreddibhtiwtcatnoC erofebsreddibhtiwtcatnocsIronimyfiralcotylnonoitaulave
?seussi
syawla,ylnoseussironiMhtiwdnagnitirwnidedrocer
tnemerucorpdnalacinhcetfoesU.tneserpsevitatneserper
fieriannoitseuqnettirwa.snoitseuqlareves
.82 sreddibhtiwtcatnoC retfasreddibhtiwtcatnocsIyfiralcotylnonoitaulave
?seussignidnatstuo
dnaylnoseussignidnatstuOlacinhceT.desueriannoitseuq
tnemerucorpdnaynatatneserpsevitatneserper
.sgniteem
.92 noitaulavelaniF ylraelcnoitaulavelanifseoDtisidnanoitcadnemmocer
dnalacinhcetybdengistsniagasreciffotnemerucorp
nettirwtnednepedniriehtriehtgnitacidnistnemmoc
ehtrofesiwrehtorotroppus?lasoporp
yllaudividnisreciffodemanehTyehtnoitcatahwylraelcgnitats
yehtfineve,yhwdnaesoporpnoitaulavenafosrebmemera
lenap
.03 rossessatnednepednI evitisnesroeulavhgihroFtnednepedninasistcartnoc
esohwdetniopparossessalanifehtnidedulcnisitroper
?noitaulave
’ytrapdrihtdetsurt‘foesUssecorpniecnedifnocgnitaerc
drawA
.13 noitadnemmoceR anodesabneviglavorppasIybdetroppusnoitadnemmocer
dnarossessatnednepednilaicnanifottcejbus?selurtnemtimmoc
slavorppafoliarttiduareporP
.23 tcartnoc/redrO deussi/dengistcartnoc/redrosI?tnemtrapeDtnemerucorPyb
dnaderaperpstnemucoDohwsreciffoybdengis
tnemerucorpehtdnatsrednufostcepsalautcartnocdna
gnioderayehttahw
.33 liaM fodohtemerucesaerehtsIottcartnoc/redrofoyreviled
?reilppus
ssecorptpiecer/yrevilederuceS
239
Best Practice Guide and Bad Practice Warnings
Notes
1. This definition (from ‘Setting New Standards’) is universally
applicable.
2. Transparency International identifies this as a key practical result of
corruption.
3. Data and decisions should be distributed as widely as possible,
unless there are exceptionally genuine issues of commercial confi-
dentiality. Even then, information may be released possibly within a
relatively short period.
4. For example, a user/technical officer and a procurement officer
sitting on an evaluation panel.
224
Davies
2. Inefficiency and corruption are the enemies of best value for
money. Best practice procurement motivates all parties to search
for the best way to achieve best value for money and this search
can, if pursued, resolutely eliminate both inefficiency and
corruption.
3. Corruption is bad for business. “Corruption distorts the opera-
tions of markets and deprives ordinary people of the benefits
which should flow from them.”2
4. Open decisions are usually the best decisions. Transparency
means creating a decision-making process that is open to the
participants3 and to subsequent audit. Documented records
capable of peer and lay evaluation should be maintained at all
decision-making stages. They do not have to be long but they
must be clear.
5. Separation of duties is essential. The person requiring a purchase
must be a different individual from the person placing an order
or contract and the payment must be made by yet another
individual.
6. Never hid in teams. Teams are a proven exceptionally effective
means of delivering high quality outputs. Unfortunately, they can
often be used to obfuscate responsibility. People with procure-
ment responsibility4 are personally accountable and must not sign
joint reports that are part of the procurement process without
also stating (in writing) their own professional opinion on the
supported matters.
7. Use the simplest solution(s). Needless complication creates
inefficiency and more opportunities for corruption. Fast, simple
solutions administered by the best quality personnel are usually
more efficient and less corrupt than many checks and controls.
225
Best Practice Guide and Bad Practice Warnings
Section B: Generally Applicable Good and Bad Practices
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
tcejor
p/deifit
nedi
deeN.1
noit
pecni
,tcejorpafo
esoprupdna
epocsehT
dna,margorp,tegdub
sti.dediced
eraygetarts
tnemerucorp
cigetartstee
mot
tegdubezitiroirP
sdeenenon
erehw
detarenegdee
Ndeen
eniunegro
stsixeyleniuneg
.detareggaxe
DC
tcudorpdne
derisedeht
nosucoF
•tsael
rofti
eveihcaot
wohedice
D•
troffe/emit/tsoc
ylppuseht
eganam
otderaperp
eB•
niahc
yreviledelbaliava
ottcudorp
dnetiF
etauqedanignitsixe
tpeccA.ssecorp
.egnellahctuohti
wsniahc
ylppus
DC
B
eulavtseb
tegot
ezisegakcap
ediceD
evlovniya
msihT.tekra
mmof
'gnildnub'ro
stcartnocegral
gnittilpsmu
mitpoeht
tegot
senorella
ms.ezis
rofegral
oottcartnoc
gnicalP•
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mocsesaerced(
tekram
)eruliaffoksir
sesaercniegakcap
tilpsot
sesoporprosivd
A•
ohW'
ksa(secafretni
eganam
dna)'?tso
mstifeneb
llams
otniseilppus
ronim
tilpS•
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rofsegakcap
seinapmoc'esacfeirb'
ED
CB
EB D
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CtcejorP'
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D.srotartsinimda
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tnednepednirieht
ekam
drawot
gnikrow
elihw
raelcnoinipo
.slaogno
mmoc
ottneivresbus
tnemegana
M•
pihsredaelcitarcotua
denifedton
seituD
•ro
ytilibatnuoccalaudividnI•
sdraobfoesu
ybdediova
snoisicedseetti
mmoc
dna
ED
CB
SLEVEL
KSIR
ytteP:duarF—D;ksiR
noitpurroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacilppa
yllareneg,ecitcarptseB—
A:.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiRnoitpurro
C
226
Davies
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
noit
pecni
tcejor
p/deifit
nedi
deeN.1
)deu
nitn
oc(ygetarts
tnemegana
mtcartno
C,tneilcfo
esutseb
ehtseka
mreil
ppus/rotcartnoc
dnatnatlusnoc.secruoser
etairpor
ppani
roetanoitro
porpsi
Dro
tnatlusnocyb
demussa
seloreht
otgnitubirtnoc
tonrotcartnoc
yenoM
rofeulaV
tseBfotne
meveihca
EB
rof)dohte
m(ygetarts
tnemyaP
ehtetavito
mtseb
ottcartnoc
tnuoccaotni
gnikatreil
ppus
dnaecruoser
tnemegana
mtneilcfo
ecneirepxe
)dohtem(
ygetartstne
myaPfo
ssolot
gnidaeletair
porp
panietu
psidlautcartnocrolortnoc
DC
B
sn
oitacificepS.2
.detnaw
sitah
wgnitatS
etelp
mocdna
raelC
etelp
mocnidna
raelcnU
DC
B
ton,noitacificeps
ecnamrofre
petir
W.noit
pircsedtcejor
pdeliated
asrotcartnoc
rose
mandnarb
yficepS
DC
B
tnemerucor
peht
wohfosliated
timiL
)ecivresa
rofneve(
dedivorp
ebot
siretta
myllautca
tahtsgniht
ot
gnikrow
rosdohte
meht
tuoteS
•eb
otsi
tnemerucor
pwoh
dnaetad-fo-tuo
gnisunetfo,dedivor
pegdel
wonksevles
mehttcidartnoc
stnemuco
D•
timil
dna(yfice
psrevO
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pmoc
DC
B
srered
netyfit
nedI.3
rehtoro
sreilp
puslaitnetopfo
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ediceD
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moc,.g.e(ecruos
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pus
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rolanoitaN
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mesitrevdaairetirc
evitcejbotsniaga
ssessA
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detcirtseR•
nepo
ro01>.g.e(
gnolooT
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)3<(trohs
ootro
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tonera
tahts
mrifgnitivnI
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otecna
mrofrep
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doogforerednet
elgniS•
DC
B
SLEVEL
KSIR
noitpurro
CytteP:duarF—
D;ksiRnoit
purroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacil
ppa
yllareneg,ecitcarp
tseB—A:
.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
227
Best Practice Guide and Bad Practice Warnings
ssecorptnemerucorp
niegatS
ecitcarptseBecitcarp
daBksiR
)deunitnoc(srerednet
yfitnedI.3:eulav
muideM
roeulav
hgihsA
•detadpu
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tsilsreilppus
tcartnoc)ffollac(
krowe
marF•
reilppus
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tcartnoc)ffollac(
krowe
marF•
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rofsa
detceles(reilppus
evitcejbotsniaga
ssessa(gnippohS
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wemarf
notonfi
)airetirc
gnippohStekra
mfoegdel
wonktuohti
w•
noititepmoc
gnirongi•
DB
dnareilppus
krowe
marftceleS
eulaVhgi
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tsilsreilppus
detadpuyriuqne
tuohtiw
stsilot
segnahccoh
dAssecorp
evititepmoc
reporpD
B
fitekra
mytido
mmoc
niesahcruP
dnaevititep
moc,elbaliavaetairporppa
tekram
etauqedaniyfitnedi
otgniliaF
niahcylppus
ehtgnigana
mton
dnaylgnidrocca
DB
ssecorpyriuqnE.4
-redneTot
noitativnI(yriuqne
ehtgniussI
srerednetdeifitnedi
ehtot
)TTI
wollaot
dedivorpe
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dnatsrednuot
rerednetrednet
eulavtseb
eraperp
rerednetrehto
ro'tnanetgnittis'
eviG
egdelwonk
tceridhti
wsdeenruoyfo
srehtoevig
otgniliaf
ybegatnavda
narednet
eraperpot
emit
etauqeda
DC
B
llaerusne
otnekat
eractaer
Gdna
sliatede
masevah
srerednetseitinutroppo
roero
mnevig
srerednetlaudividnIsrehto
nahtnoita
mrofnitnereffid
DC
B
SLEVEL
KSIR
noitpurroC
ytteP:duarF—D;ksiR
noitpurroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacilppa
yllareneg,ecitcarptseB—A:
.noitpurroc)lagelli
tontub(lanoitutitsnI—E;ksiR
228
Davies
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
)deu
nitn
oc(ssec
orp
yriuq
nE.4lla
otyad
emas
deussistne
mucoD
srerednetse
mittnereffid
tadeussi
stnemuco
DD
CB
ybdefeirb
yllufera
sreredneterusnE
ot)tnavelerfi(
ytinutrop
pognidivor
pfi(
gnifeirbdeliated
rofdna
etistisiv
sreddibllarof
tsebyllaus
U.)dedeen.e
mite
masta
defeirbeb/tisiv
ot
dnastisiv
etisrof
ytinutrop
potcirtseR
ecnatsissarehto
timil
DC
B
snoitseuq
s'reredneta
rewsn
Alla
otsei
pochti
wgnitir
wni
yltp
morp
srerednet
otsre
wsnanettir
weussi
oteruliaF
ote
mite
masta
snoitseuq
’srerednetsrerednetlla
DC
B
aylla
mron(tcatnocfo
tniop
elgniSsrerednet
htiw
)reciffotne
merucorp
deggolsnoitasrevnoclla
dna
ffatstneilcfo
eciohcsah
reredneT).cte,s
OEC,ffats
roinesylralucitra
p(evig,snoitseu
qre
wsnalliw
ohw
nehw
yltcerid,.cte,ecivdadehcaor
ppa
DC
B
gni
nep
ore
dneT.5
eulaVmuide
Mdna
hgiH
=H
eulaVwoL
=L
dnagniviecer
rofstne
megnarraehT
.sreilp
pusmorf
srednetdecir
pgnine
poya
mtne
meergakro
wemarf
arednu
sreffO
nisselnu,lia
myranidro
sadetaert
ebselurla
mronesac
hcihw
ni,noititep
moc.yl
ppa
etaddeifiton
ybsdib
delaesdevieceR
.deneponu
sdibetal
nruteR.emit
dna)L
&H(
sdibetal
wollA
DC
litnulaitnedifnocdna
erucespeeK
)L&
H(e
mitdna
etadgnine
polia
mlamron
sataerT
DC
SLEVEL
KSIR
noitpurro
CytteP:duarF—
D;ksiRnoit
purroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacil
ppa
yllareneg,ecitcarp
tseB—A:
.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
229
Best Practice Guide and Bad Practice Warnings
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
)deu
nitn
oc(g
nine
po
red
neT.5rednetla
mrofni
rocilbup
ninep
O)
H(gninepo
liamla
mronsa
deviecerneh
wnep
OD
C
lenapgninepo
rednetlamrof
ninep
O)L(
liamla
mronsa
deviecerneh
wnep
OD
C
fi(sliated
yekdna
)s(ecirpecnuonn
A)
H(sreddiblla
ot)yna
sselnulaitnedifnocnoita
mrofnipeeK
ylsuoiverp,laicrem
moca
siereht
.osod
otton
nosaer,decnuonnanu
DC
rednetdexedni
ytirucesni
droceR)L
&H(
retsigerkoob
dexedninu,fael-esoolni
retnEdedne
maylisae
ebnac
tahtD
C
tne
mssessA/
noitaulavE.6
enohcih
wediced
otsrednet
esylanA
.yenom
rofeulav
tsebsedivorp
TTIni
airetirctne
mssessayfito
NteL.airetirc
tnemssessa
yfitonton
oD
!sseugrerednet
ehtD
CB
seitudfonoitagerges
reporperusnE
lacinhcetelbatnuocca,de
manhti
w-oc
sreciffotne
merucorpdna
ybgnitarepo
yltnednepednignissessa snoitca
gnidnem
mocerdna
ylevitcelloceetti
mmoc
tnemssess
Aseka
mdna
srednetseni
maxe,lanosrep
tuohtiw
noitadnem
mocerytilibatnuoccalaudividni
DC
B
htiw
tcatnoC:noitaulave
erofeBseussi
ronim
yfiralcot
ylnosreddib
htiw
gnitirw
nidedrocerfi
dnatne
merucorpdnalacinhcet
aesu
tseB.tneserpsevitatneserper.eriannoitseuq
detcatnocsreddiB:noitaulave
erofeBgnitee
mrof
evitatneserperelgnis
yb.drocer
deifirevon
siereht
hcihw
rof
DC
B
SLEVEL
KSIR
noitpurroC
ytteP:duarF—D;ksiR
noitpurroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacilppa
yllareneg,ecitcarptseB—
A:.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
230
Davies
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
)deu
nitn
oc(t
nemssess
A/n
oitaulavE.6hti
wtcatno
C:noitaulaveretf
A.seussi
gnidnatstuoyfiralc
otsreddib
dnaeriannoitseu
qa
esutseB
tnemerucor
pdnalacinhcet
tatneser
peb
tsum
sevitatneserper
.sgniteem
yna
detcatnocsreredneT:noitaulave
retfA
gniteem
rofevitatneser
perelgnis
yb.drocer
deifirevon
siereht
hcihw
rof
DC
B
noitcasdne
mmocer
noitaulavelaniFdnalacinhcet
ybdengis
sidna
riehttsniaga
sreciffotne
merucorp
stnem
mocnettir
wtnedne
pedniesi
wrehtoro
trop
pusrieht
gnitacidni.laso
porp
ehtrof
sreciffotne
merucorp
dnalacinhceTeka
mro
troper
dengisnuecudor
p.noitadne
mmocer
tnioj
DC
B
stcartnocevitisnes
roeulav
hgihroF
detniop
pasi
rossessatnedne
pednina
lanifeht
nitro
pera
sedulcnidna
.noitaulave
stcartnocevitisnes
dnaeulav
hgiH
tnednepedni
tuohtiw
detaulaveera
.tnemssessa
DC
draw
A.7
deecorp
otreil
ppus
ehtgnitcurtsni
yllamroF
nodesab
neviglavorp
pA
ybdetro
ppus
snoitadnem
mocerot
tcejbusdna
rossessatnedne
pedniselur
tnemti
mmoclaicnanif
nevedevor
ppallits
noitadnem
moceRserudecor
pni
hcaerbsuoires
niD
C
ybdeussi/dengis
sitcartnoc/redr
Otne
mtrape
Dtne
merucorPeulav
muidem
rohgi
Hresu
ybdeussi/dengis
tcartnoc/redrotne
mtraped
D
ottcartnoc/redrofo
yrevilederuceS
reilp
pustcartnoc/redrofo
yrevilederucesnI
D
SLEVEL
KSIR
noitpurro
CytteP:duarF—
D;ksiRnoit
purroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacil
ppa
yllareneg,ecitcarp
tseB—A:
.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
231
Best Practice Guide and Bad Practice Warnings
ssecorptne
merucorpni
egatSecitcarp
tseBecitcarp
daBksiR
yllarene
G.8
dooggnitceffa
srotcafrehto
emoS
serudecorp
tnemerucor
p
nisegatslla
tadet
podaycnera
psnarTssecor
peht
ylirassecennut
peksi
noitamrofnI
otdeen‘laicifitra
dnalaitnedifnocdeil
ppa
selur’
wonk
DC
B
foelbaliava
ecnedivedetne
mucoD
snoisicedllarof
nosaereht
fosisab
ehtno
nekatsnoitc
Adrocer
ondna
some
mdetro
ppusnu
noitacifirevtnedne
pedniwolla
otnekat
neebsah
noitcare
porp
taht
DC
B
ebdluohs
gnipeekesuoh
eciffO
tnellecxeseciffo
yditnU
DB
seciffonal
pne
podenil
picsiD
srooddesolc
htiw
secifforalulle
CD
CB
edifanobdnaffats
ylnO
node
wollasrotcartnoc/srotisiv
sesimer
p
deyolp
me-nonrof
sseccaysaE
,cilbup,sreb
mem
ylimaf,sregnesse
m.cte
DC
B
SLEVEL
KSIR
noitpurro
CytteP:duarF—
D;ksiRnoit
purroC
dnarG:duarF—
C;tnemegana
mdaB—B;elbacil
ppa
yllareneg,ecitcarp
tseB—A:
.noitpurroc
)lagelliton
tub(lanoitutitsnI—E;ksiR
232
Davies
Section C: Questions
The following questions are intended to assist anyone seeking to make a
judgement on the effectiveness of a procurement system or a procure-
ment action (such as an individual contract). Some answers can be
satisfactorily resolved by asking questions of the participants in the
process, but others need an examination of the relevant papers and before
drawing a conclusion. These are not meant to be substitutes for a full
procurement audit, but help to highlight areas that need attention or an
in-depth audit. Table C1 consists of general questions relating to both
systems and individual procurement, while Table C2, is more specific to
individual procurement actions.
noitseuQ :rofgnikooleraewtahW
tnemeganamdnapihsredaeL
.1 pihsredaeL dnalevelpotaerehtsIreganamlaitneulfni
tsebfoesuacehtgninoipmahc?tnemerucorpecitcarp
otlevelpotehttatroppuSdnaytivitcaeulavtsebetadilav
lavorppa’lacitilop‘edivorp
.2 tneilcdemrofninA yekyrevenisredaelerehterAfoelbapacertnectegdublacitircehtgnidnatsrednu
?seussitnemerucorp
ecnedifnocevahohwelpoePot)egdelwonknodesab(
dnaecitcarpdabegnellahctsebfotnemniattaehttcerid
ecitcarp
.3 noissiM neesdnadenifedeulavtsebsIgniyubllafosucofehtsa
?ytivitca
tsebrofnoissapa“(sohtenAetavitomlliwtaht)”ecitcarp
lanoitpecxeotstnapicitraptroffe
.4 gniknihtcigetartS sffatstnemerucorperAnisbojriehteesotdegaruocne
?smretcigetarts
esoht,.e.i,snoituloscigetartSerasevitcejboyeknosucoftaht
,elbaniatsusebotylekiltnatsiserduarfdna,evitceffe
.5 niahcylppuStnemeganam
notupgniebsisisahpmetahWdnatnemeganameht
ylppusrettebfotnempoleved?sniahc
ylppustpeccaotlasuferArognolrevewoh(sniahc
erataht)eganamotxelpmoctneiciffeni
Table C1: Systems and Individual Procurement
233
Best Practice Guide and Bad Practice Warnings
noitseuQ :rofgnikooleraewtahW
scihtE
.6 yciloP ?ycilopscihtenettirwaerehtsI sitahtyciloplacitcarpAelpoepllaybot’nodengis‘
devlovni
.7 erutluC saneestnemerucorpdoogsIehthtiwsngilatahtytivitcana
ehtfosevitcejbolaicos?stnapicitrap
eulavtsebdnatnempoleveDeratahtsevitcejboyenomrof
tnaveleryllarutluc
.8 ssennepO dessucsidsrettamlacihteerA?ylnepo
nispahrep,noissucsidnepOytilauqfotxetnoceht’selcric‘tnemevorpmi
seitilicaF
.9 eciffO gnipeekesuoheciffosI?tnellecxe
ylisaeerasrepaperehwseciffOehttuohtiwrohtiwdetacol
ralugerehtfoecneserpstnapucco
.01 secapseciffO ecapseciffoehtsiwoH?dennalp
nepodenilpicsidylbareferPsedargllarofseciffonalp
.11 sesimerP eciffoehtotsseccasahohW?saera
edifanobdnaffatsylnOnodewollasrotcartnoc/srotisiv
sesimerp
serudecorP
.21 seluR selurtnemerucorpehterAgnikrowekamotdengised
?tluciffidmehtdnuor
ssecxegnitaerctuohtiWtnemerucorp,ycarcuaerub
.kaewebtondluohsselur
.31 ycnerapsnarT rofsnosaerehterAsnoisicedtnemerucorp
foelbapacdnadetnemucod?sweivernoitcatsop
liatednisnoitanalpxEehtfoelacsehtotetairporppaotnettirwsyawla,tnemerucorp
ottsilaiceps-nonawollasnoisicedyekdnatsrednu
.41 seitudfonoitarapeS fonoitarapesreporperehtsI,demanhtiwseitud
dnalacinhcetelbatnuocca?sreciffotnemerucorp
gnitarepoocsreciffodemaNtub yltnednepedni gnissessa
snoitcagnidnemmocerdna
.51 foytilibatnuoccAslaudividni
,sresu(sreciffolaudividnierAtnemerucorprolacinhcet
yllaudividni)sreciffo?snoitcariehtrofelbatnuocca
dnasnoitcayfitsujohwsreciffOnA(.ylgnidroccangis
erutangislavorppadeifitsujnuehtsselnuetauqedatonsi
ehtmorfraelcetiuqsinosaer).txetnoc
234
Davies
noitseuQ :rofgnikooleraewtahW
)deunitnoc(serudecorP
.61 otgniylppaseluRdnaslenap
seettimmoc
ottneserpslortnocerehterAsnoisicedeettimmoctneverp
gnivomerfosnaemagnieb?ytilibisnopserlaudividni
llaotnwonkselurraelCdnasrebmemeettimmoc
dewollofsyawla
.71 ssecorpyranilpicsiD ,seitudriehtfoerawaffatssIdna,snoitcariehtrofdeenehtyranilpicsidottcejbusyehterafoesubaotlanoitroporpnoitca
?serudecorpeht
yllufdnadetnemucoD.serudecorpdootsrednu.noitacilppafoecnedivE
lortnocdnatiduA
.81 tiduatnemerucorP tnemerucorpdeniarterehterAnahtiwelbaliavasrotidua
tidualanretnitnednepedni?noitcnuf
fotnednepednielpoepdeniarTnoitcnuftnemerucorpeht
.91 tiduaeulavtseB tsebenimaxesrotiduaoDllewsaseussiyenomrofeulav
?tnemeganamsimlaicnanifsa
foelbapacrotiduArofeulavtsebgnigaruocne
dnatsrednuyllufdna,yenomssecorptnemerucorp
.02 ?ssecorpehtfotraP fotraptnemtrapedtiduaehtsI?ssecorplavorppaeht
morfetarapeselors’rotiduA:etoN(ssecorplavorppaeht
noesivdayamtiduAserudecorpfonoitaterpretni
tontub,.cte,ecitcarptsebdnalavorppaehtfotrapsa
)ssecorp
.12 srepeeketaG ytrapdrihtrofselorerehterAtsohehtnisrepeeketag
?noitazinagro
drihtdetsurt‘foesuehTstnegatnemerucorpsa’seitrap
ehtfosrebmemsaroyam,.cte,slenaptnemssessa
etairporppaeb
elpoeP
.22 noitcelesffatS tnemtimmocrofnesohcffatssIsaytsenohdnasevitcejboot
?laitnetoplacinhcetsallew
ewelbapacyllacinhcetehtfOtsomesohtgnikeesera
tsebeveihcaotdetavitomeulav
.32 gniniarT tegotemmargorpaerehtsInaotdeniartffatstnemerucorp
lanoisseforplanoitanretni?dradnats
tnelaviuqeroSPIC
235
Best Practice Guide and Bad Practice Warnings
noitseuQ :rofgnikooleraewtahW
)stnatlusnoC(srosivdA
.42 noitceleS troppusotnesohcsrosivdaerAriehtfosevitcejboyekeht
?stneilc
ewelbapacyllacinhcetehtfOtsomesohtgnikeesera
tsebeveihcaotdetavitomeulav
.52 ecitcarptseB lliwohwthguossrosivdaerAsecitcarptsebetomorpylevitca
?noitpurroctabmocdna
otcitsaisuhtneerasrosivdAeradnasecitcarptsebetomorp
tabmocotdettimmocnoitpurroc
.62 ecnamrofreP rofdedrawersrosivdaerA?ecnamrofreplanoitpecxe
dnatsrednuotelpmiSgnidrawersevitnecni
slaoggnirettebrotnemniattatneilcybtes
.72 yticapaC dliubotdeenaerehtsIgnomasaeraesehtniyticapac
?srosivdaeht
niahcylppusevitcAevorpmiottnemeganam
eulav’srosivda
Table C2: Individual Procurement
noitseuQ :rofgnikooleraewtahW
deifitnedideeN
.1 deeN ehtrofdeenlaeraerehtsI?tnemerucorp
sdeenetairporppanAronimroffeirb(noitacifitsuj
regralrofdeliated,smeti)stnemerucorp
.2 ezisegakcaP egakcaptnemerucorpehtsI?tekramehtrofezisthgireht
otdesimitpoegakcapfoeziSyticapactekramdnadeenhtob
.3 ygetartstnemeganaM rofmetsyss’tneilcehtsItnemerucorpehtgniganam
?evitceffetsomeht
etairporppatneiciffenAybdecneulfniton,metsys
’stseretnidetsev‘
.4 ninekatsiecivdalanretxefItisi,ygetartsgnidiced
s’tneilcehtniylbanoitseuqnu?tseretni
morftifenebnacrosivdafItsumti,tneilcotnevigecivda
tonsahsihttahtraelcebehtfoerutanehtdecneulfni
ecivda
236
Davies
noitseuQ :rofgnikooleraewtahW
)deunitnoc(deifitnedideeN
.5 ecruosertekraM ygetartstnemerucorpseoDtekramfoesutsebekam
dnatnatlusnoc,tneilc(?secruoser)reilppus
saelbaliavasitahwfoesutseBdesopmicialumrofotdesoppo
seigetarts
.6 dohtemtnemyaP dohtemtnemyapehtseoDdnareilppusetavitomtseb
?tneilctcetorp
snoitpofosnoitaredisnoC,stegrat,seludehcs,muspmul(
laicremmocrehtodna).ctesrotcaf
noitacificepS
.7 ylppusfonoitpircseD nettirwreporpaerehtsI?noitacificeps
)elbissopsafeirb(raelCnoitpircsed
.8 sisaB ecnamrofreproliatedtisI?desab
desabecnamrofrepylbareferP
.9 snoitcirtseR tcirtserylirassecennutiseoD?sreilppus
,sessecorp,semandnarboNtnadnuder,nigirofoecalp
.cte,sdradnats
.01 sessecxE detseuqergnihtyrevesI?dedeen
’gnitalpdlog‘oN
srerednetgniyfitnedI
.11 stsilredneT detaerctsilrednetehtsIecitcarptsebagniwollof
?ssecorp
3noitceS,BelbaTeeS
.21 skrowemarF aerehtsi,krowtaepersisihtfI?tcartnockrowemarf
ebdluohsereht,krowtaeperfItnemegnarrakrowemarfa
ssecorpyriuqnE
.31 emiT sdoirepemitelbanosaerevaH?dewollaneeb
wollaotdedivorpemithguonEsksirdnatsrednuotrerednet
redneteulavtseberaperpdnafisdoirepDRBIroUE(
)elbacilppa
.41 ytinutroppolauqE emasevahsrerednetllaoD?seitinutroppodnasliated
noitamrofniemassahenoyrevEnevigton’stnanetgnittis‘dna
ruovaflaiceps
.51 stnemucoD emasdeussistnemucoderA?srerednetllaotyad
eussiyademaS
237
Best Practice Guide and Bad Practice Warnings
noitseuQ :rofgnikooleraewtahW
)deunitnoc(ssecorpyriuqnE
.61 stisiv/gnifeirB ybdefeirbyllufsreredneterAfi(ytinutroppognidivorp
rofdnaetistisivot)tnaveler?)dedeenfi(gnifeirbdeliated
emaseviecersreddibllAtagnifeirb/tisiv,.g.e(gnifeirb
)sreddibllarofemitemas
.71 snoitseuQ snoitseuq’sreredneterAgnitirwniyltpmorpderewsna
?srerednetllaotseipochtiw
srerednetllaotdnatpmorP
.81 fotniopelgniStcatnoc
fotniopelgnisaerehtsIayllamron(tcatnoc
htiw)reciffotnemerucorpsnoitasrevnoclladnasrerednet
?deton
tpeksdrocerdnanosrepelgniS
gnineporedneT
.91 -non(sdibdelaeS)krowemarf
ybdeviecersdibdelaeserA?emitdnaetaddeifiton
sdibdetimilemit,delaeS
.02 -non(sdibetaL)krowemarf
denrutersdibetalerA?deneponu
erudecorplamronsagninruteR
.12 -non(ytiruceS)krowemarf
dnaerucestpeksdiberAemitgninepolitnulaitnedifnoc
?ecalpdna
ssecorperuceS
.22 hgih(gninepolamroF)eulav
nirocilbupnideneposdiberA?lenapgnineporednetlamrof
ssecorplamroF
.32 wol(gninepolamroF)eulav
lamrofnideneposdiberA?lenapgnineporednet
ssecorplamroF
.42 tnemecnuonnacilbuP)eulavhgih(
fi(sliatedyekdna)s(ecirperA?sreddibllaotdecnuonna)yna
tnemecnuonnalamroF
.52 sdrocersredneT nideedrocersredneterArednetdexedniytiruces
?retsiger
ytirucesdeniatniamaerehtsI?retsiger
noitaulavE
.62 airetirctnemssessA deifitonairetirctnemssessaerA?redneTotnoitativnIni
srerednetwollaotairetircraelCtneilctahwyltcaxeeesot
stnaw
238
Davies
noitseuQ :rofgnikooleraewtahW
)deunitnoc(noitaulavE
.72 sreddibhtiwtcatnoC erofebsreddibhtiwtcatnocsIronimyfiralcotylnonoitaulave
?seussi
syawla,ylnoseussironiMhtiwdnagnitirwnidedrocer
tnemerucorpdnalacinhcetfoesU.tneserpsevitatneserper
fieriannoitseuqnettirwa.snoitseuqlareves
.82 sreddibhtiwtcatnoC retfasreddibhtiwtcatnocsIyfiralcotylnonoitaulave
?seussignidnatstuo
dnaylnoseussignidnatstuOlacinhceT.desueriannoitseuq
tnemerucorpdnaynatatneserpsevitatneserper
.sgniteem
.92 noitaulavelaniF ylraelcnoitaulavelanifseoDtisidnanoitcadnemmocer
dnalacinhcetybdengistsniagasreciffotnemerucorp
nettirwtnednepedniriehtriehtgnitacidnistnemmoc
ehtrofesiwrehtorotroppus?lasoporp
yllaudividnisreciffodemanehTyehtnoitcatahwylraelcgnitats
yehtfineve,yhwdnaesoporpnoitaulavenafosrebmemera
lenap
.03 rossessatnednepednI evitisnesroeulavhgihroFtnednepedninasistcartnoc
esohwdetniopparossessalanifehtnidedulcnisitroper
?noitaulave
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239
Best Practice Guide and Bad Practice Warnings
Notes
1. This definition (from ‘Setting New Standards’) is universally
applicable.
2. Transparency International identifies this as a key practical result of
corruption.
3. Data and decisions should be distributed as widely as possible,
unless there are exceptionally genuine issues of commercial confi-
dentiality. Even then, information may be released possibly within a
relatively short period.
4. For example, a user/technical officer and a procurement officer
sitting on an evaluation panel.
241
Opening Speech: Corruption Distorts Development Investments
The OECD Convention andIts Impact on FutureAnti-Corruption Strategies
243
The OECD Convention and Beyond: The Supply Side of the Development Aid Business
The OECD Convention andBeyond: The Supply Side of theDevelopment Aid Business
Hansjörg Elshorst
TRANSPARENCY INTERNATIONAL (TI) WAS ASKED to contribute its views to
three of the conference workshops, procurement, institutional develop-
ment, and the Organisation for Economic Co-operation and Develop-
ment (OECD) process. Due to some misunderstanding this was commu-
nicated only when the papers were already due. We therefore provide as a
summary (1) an introductory note common to each of these three
subjects and (2) excerpts from existing papers on the specific subjects.
The wording of the questions provided to TI suggests that government
ownership will be an important issue common to the different workshops
discussing the bilateral contribution. Not surprisingly, this has been a
dominant issue in reactions to official aid within the TI movement.
Underscoring government ownership of development on the part of donor
agencies is seen as one of the causes for increasing corruption in the
nineties and when discussing strategies to fight corruption, this creed
should be revisited. This revisiting process may fit particularly well into an
anti-cooperation conference about the contribution of bilateral donors.
244
Elshorst
In many northern countries development cooperation, in the
beginning of its implementation, was seen as a task of societies not just
governments. Initially, bilateral activities included an interest in eco-
nomic, cultural, and academic cooperation. Civil society in its classical
configuration such as churches, unions, and charitable organizations
played a major role long before the term “civil society” was introduced.
Parliaments and media took a large interest in development.
By contrast, multilateral cooperation by its mandate was cooperation
between governments and government-controlled organizations. The
private sector and civil society gained prominence only recently. The
instruments, however, remained predominantly government centered and
controlled. Money loaned by donors was widely considered owned by the
borrowing government. In spite of that, discussions about ownership
arose in the multilateral area in the late eighties. This may have been a
reaction to mounting conditionalities, which multilateral organizations
tried to retain control despite government ownership.
Structural adjustment and sector loans on a massive scale, co-
financed by bilateral donors, gave ample possibilities to experiment with a
form of government ownership where the government actually disposed
of large-scale funds. Without taking sides in the ongoing dispute about
the success of these instruments, anti-corruption proponents blame them
time and again for the rise of rampant corruption.
Widespread corruption and an assessment of the effectiveness of aid
have led to the conclusion that government ownership of development
resources can only work when good governance exists. However, this
leads to two possible consequences (1) donor agencies feel justified when
they drop countries from their portfolio because they do not meet the
preconditions of good governance, and (2) forms of development
cooperation are chosen that help reduce the negative consequences of
giving resources to corrupt administrations.
In many countries, good governance is absent because institutions
have been corrupted. In TI’s view it is not an acceptable solution to
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The OECD Convention and Beyond: The Supply Side of the Development Aid Business
abandon dozens of countries and leave them in a situation in which
neither trade nor aid is accessible to them. TI’s argument that the North,
South, and East are all responsible for corruption clearly applies to aid—
there is a giving hand when there is a receiving one.
Smaller donors may discover that restricting their cooperation to
countries where they practice good governance is a more realistic option
than establishing it as a precondition or objective for development
cooperation. In view of different interests, this is not feasible for big
countries and organizations. For them, requiring good governance as a
precondition for development cooperation is a dangerous trap. They will
have to continue to work with many countries that do not meet this
requirement. To do so will require donor administrations to engage in
decision making on the political level, which could result in political
fallout for the some of the unavoidable failures in such cooperation.
There is widespread agreement behind the debate about government
ownership that development has to be owned by those who are supposed
to develop themselves. In the multilateral world, this has been translated
into government ownership of resources. Since the early 1980s, many
bilateral organizations tried to promote ownership in a different way.
They took a pluralistic approach to development, strengthened self-
initiative, empowered partners outside of government, and promoted
stakeholder participation throughout the entire project cycle. While this
was partly done together with government, it is not likely that govern-
ment on its own would promote this approach as passionately as many
development organizations. This is also probably true under conditions
of good governance as the German reunification process has proven in
the North. How governments handle such initiatives when obliged to
apply them can be studied in cases where multilateral organizations made
participatory elements part of their conditionalities.
Many vital government services suffer from a dramatic shortage of
funds. This is one of the arguments for putting all available resources
behind these services. However, the structural deficits in government
246
Elshorst
budgets are so enormous that very limited bilateral funds have to be
employed in a more effective way to be relevant. This does not contradict
the quest that much more resources from the outside are badly needed.
Despite their present limitations, they are relevant if they contribute to
institutional reforms that improve resource mobilization, increase
efficiency of public services, and transfer enviable public obligations into
private responsibility.
TI is convinced that such reforms cannot be expected from the
public sector alone. A coalition is needed, bringing together change
agents in the public sector with interested and affected parties in civil
society and the private sector. TI expects contributions to facilitate such
coalitions that are determined to fight corruption from the bilateral
development organizations. It is for this reason that TI takes a stand that
may appear to debate different approaches to promote ownership and
reforms within the development community.
There is a common denominator in the following contributions to
the three different workshops:
• TI has developed a tool to improve public procurement, the
Integrity Pact. It is clearly a major public responsibility to mobilize
the capabilities of the private sector for public objectives. The
Integrity Pact presents a way in which bidding companies and civil
society can, to some extent, compensate for deficiencies within the
public sector.
• Bilateral donors have invited TI to talk about what would be the
most relevant bilateral contribution to contain corruption. TI has
underlined the need to reform corrupt institutions and it has
pointed to the specific competence of bilateral donors to promote
reforms. It draws on the variety of its development organizations
to coordinate work within government administrations that can
mobilize external pressure towards change.
• The OECD process, getting legislation passed in OECD countries
and beyond, is clearly a public sector responsibility. However, the
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The OECD Convention and Beyond: The Supply Side of the Development Aid Business
convention would not have materialized and will not be effective
without the active cooperation of civil society and the private sector.
OECD Convention and Recommendations
TI’s Role: Inviting Others to Join
TI supports OECD’s monitoring process in four ways.
1. It participates, after invitation, in all meetings relevant to further
develop and monitor the entire process.
2. TI promotes the process of ratifying the convention, working
with all political forces to accelerate the parliamentary process,
and lobbying with others where the process has stalled.
3. The organization complements the monitoring process of
legislation and its application from civil society’s perspective as
established by the OECD.
4. It continues to lobby where legislation is inadequate or lacks
implementation.
Potential Role of Donors
Donors can underline their support of the convention by establishing
preconditions for participation in donor funded programs. They can
require that major companies institute anti-corruption compliance
regulations after an initial grace period, and enact and enforce criminal
prosecution of any violators.
The OECD Convention: Where Does Implementation Stand?
The OECD Convention to Combat Bribery of Foreign Public Officials
was signed December 1997. It did not go into effect until February 1999
and then, only in those nineteen countries that ratified the convention.
Encouraging thirty-four industrialized countries, home to most of the
major international corporations, to commit to criminalizing bribery
overseas was a huge step forward. For the first time, the supply side of
248
Elshorst
international corruption would be severely restricted. Unfortunately, one
year later the convention is in danger.
Three G-7 countries, Germany, Canada, and the United States (U.S.),
according to the relevant national chapters of TI, have passed acceptable
legislation implementing the convention. France, Italy, Japan, and the
United Kingdom (U.K.), four of the G-7, have failed to take appropriate
action. At Transparency International, we believe that jeopardizes the
convention’s success because, as a practical political reality, the effective-
ness of the convention depends on coordinated action by the major
exporting states. Until all G7 states are in full compliance, other govern-
ments will be reluctant to enforce restrictions against their companies.
Why should they if major competitors are free from such shackles?
However, France now seems well on its way to passing satisfactory
legislation. This is encouraging and puts the onus on the other three.
The Italian Parliament has not completed ratification and implemen-
tation of the convention and we have been unable to verify any future
action. Japan has passed grossly deficient implementing legislation. Major
changes are necessary to meet convention requirements. It is unclear what,
and if, the Japanese Government is prepared to take corrective action.
When the British Parliament ratified the convention in 1998, the
government claimed new legislation was needless as an anti-bribery act
passed before the First World War could be construed to apply to foreign
as well as domestic bribery. It is an intriguing argument in theory. But in
practice, no prosecutor in the past ninety years has ever used the law to
bring a case involving foreign bribery. There have been indications that
the British Government might consider new legislation, but enactment is
unlikely before 2001. Such delay serves as a ready excuse for delays by
other countries.
The next six months are critical. If Italy, Japan and the U.K. come
into full compliance before the OECD Ministerial meeting in June, the
uncertainty hanging over the convention will disappear and the other
laggards can be expected to comply by year’s end. If not, the risk of
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The OECD Convention and Beyond: The Supply Side of the Development Aid Business
loosing momentum is serious. Support will erode, and the convention
could become another promising international initiative that failed.
The OECD does not police companies nor does the convention give
the organization punitive powers. That is the purpose of implementing
legislation. However, the OECD monitors the effectiveness of those laws.
Through this monitoring process, governments willing to take effective
action are assured they will not be left out on a limb. We are confident
that the anti-bribery working group led by Professor Mark Pieth of the
University of Basel has the professional competence and objectivity
needed for its work. Nevertheless, our concern about the magnitude of
this task compels us to make the following suggestions to strengthen the
monitoring program:
• The monitoring group’s work must have effective political support.
Governments with deficient laws are subjected to strong peer
pressure at the ministerial level. The sooner ministers learn that
lesson the sooner the convention will have a real impact on bribery
in the international marketplace. Tolerance for excuses and delays
in correcting deficiencies will signal other governments and
corporations that the convention is not taken seriously.
• A realistic monitoring process is a long-term effort. Phase 1,
reviewing implementing legislation, cannot be completed in one
year. Phase 2, assessing enforcement programs, is considerably
more demanding because it requires visits to the countries being
monitored, and an evaluation of enforcement programs, which is
more complex than Phase 1. Even if monitors held regular two-
month site visits, they would need nearly six years to review the
original thirty-four signatories. Subsequent reviews to address
deficiencies, plus additional accessions, would result in a
decade-long effort. It is TI’s impression that Phase 1, alone,
stretches available resources to the limit. Staffing and budgeting
plans must be put in place that reflect the magnitude, duration,
and importance of the monitoring process.
250
Elshorst
• Increased participation by the private sector and civil society will
also improve the effectiveness and credibility of the monitoring
process. While some governments support such an increase, others
prefer a more covert process that is limited to governments
reviewing other governments. We recognize that confidentiality
may be required in some parts of the process such as deliberations
among monitoring team members. However, there should be the
presumption of transparency, with OCED deciding areas of
confidentiality, not the government under review. The public is
interested in the convention’s implementation, especially where
governmental resolve is in question. The convention can be made
to work. It is up to the rest of civil society to convince politicians
that it is, indeed, what they want.
Other OECD Recommendations
While the criminalization of bribery of foreign public officials is being
ratified and tax deductibility has been abolished, the following recom-
mendations1 should be adopted.
Accounting Requirements: External Audit and Internal
Company Controls
The OECD recommends that member countries take the necessary
steps to ensure that laws, rules, external audits, and internal company
controls are aligned with the following principles and fully executed to
prevent and detect bribery of foreign public officials conducting
international business.
Adequate Accounting Requirements
1. Companies should maintain accurate, detailed records of
income and expenditures, identifying the specific components
of each transaction. Off-the-books transactions and accounts
should be prohibited.
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The OECD Convention and Beyond: The Supply Side of the Development Aid Business
2. Companies should disclose the full range of material contingent
liabilities in their final statements.
3. Member countries should adequately sanction accounting
omissions, falsifications, and fraud.
Independent External Audit
1. Member countries should determine whether the requirements to
submit for external audit are adequate.
2. Member countries in consultation with professional associations
should develop sufficient standards to ensure that external
auditors are independent, permitting them to provide an
objective assessment of company accounts, financial statements,
and internal controls.
3. Auditors should alert management when appropriate corporate
monitoring bodies uncover any irregularities and possible illegal
acts.
4. Auditors should notify competent and appropriate authorities of
all possible illegal acts of bribery.
Internal Company Control
1. Member countries should encourage the development and
adoption of adequate internal company controls including
standards of conduct.
2. Company management should outline their internal control
mechanisms, particularly those designed to prevent bribery, in
their annual reports.
3. Boards of directors and supervisory boards should create
independent monitoring bodies such as audit committees.
4. Companies should provide protection for persons not willing to
violate professional standards or ethics under instructions or
pressure from hierarchical superiors.
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Elshorst
Public Procurement
The OECD recommends the following:
1. Member countries support the World Trade Organization’s
efforts to reach agreement on transparency in government
procurement.
2. Authorities suspend those enterprises that insist on bribing
foreign public officials from competing for public contracts since
it is in violation of members’ national laws; and procurement
sanctions levied against businesses guilty of bribing domestic
public officials apply also in foreign public official bribery cases.2
3. In accordance with the recommendation of the Development
Assistance Committee, Member countries should require
anti-corruption provisions in bilateral aid-funded procurement,
promote the proper implementation of anti-corruption provi-
sions in international development institutions, and work closely
with development partners to combat corruption in all develop-
ment cooperation efforts.3
International Cooperation
The OECD recommends that its members in accordance with local laws
take the following actions to combat bribery in international business
transactions:
1. Consult and cooperate with appropriate authorities in other
countries’ investigations and legal proceedings in bribery cases,
including extradition, and sharing information and evidence.
2. Make full use of existing agreements and arrangements for
mutual international legal assistance and, where necessary, create
agreements or arrangements for this purpose.
3. Ensure that national laws support this cooperation.
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The OECD Convention and Beyond: The Supply Side of the Development Aid Business
Notes
1. As adopted by the OECD Council on 23 May 1997: Revised Recom-
mendation of the Council on Combating Bribery in International
Business Transactions.
2. Member countries’ systems for applying sanctions for bribery of
domestic officials differ as to whether the determination of bribery is
based on a criminal conviction, indictment or administrative
procedure. But in all cases it is based on substantial evidence.
3. This paragraph summarizes the Development Assistance Committee
(DAC) recommendation, which is addressed to DAC members only,
and addresses it to all OECD Members and eventually non-member
countries that adhere to the recommendation.
255
Recommendations
Recommendations
CONFERENCE PARTICIPANTS TOOK PART IN six working groups that contained
approximately thirteen to sixteen people representing various stake-
holders. Each group utilized the background papers prepared to
examine the following questions as a basis for discussion and to
formulate recommendations.
Working Group One: What guidelines and procedures can donor
countries develop to prevent and suppress corruption in their aid projects
and programs?
Working Group Two: How can bilateral donors as funding bodies
coordinate their policies and activities more efficiently and effectively with
international financial institutions and other multilateral organizations to
make the best use of their expertise and avoid overlap and omissions?
Working Group Three: How can donor countries contribute to the
collection and use of data and statistics on corruption and how can they
help devise monitoring criteria and mechanisms and utilize them for
their own programs?
256
Recommendations
Working Group Four: How can bilateral donors help recipient
countries build institutions that prevent and suppress corruption?
Working Group Five: What terms of engagement can bilateral
donors develop in their relations with recipient countries?
Working Group Six: The Organisation of Economic Co-operation
and Development (OECD) and beyond—what is the future of the
supply-side of the development aid business?
Common Themes, Conclusions, and Recommendations
A number of themes and conclusions recurred during the discussions and
several consistent conclusions emerged. They include:
1. Anti-corruption efforts alone are not adequate. They need to link
to wider efforts that build and support good governance.
Reducing poverty is the main goal of development cooperation
and therefore, the Comprehensive Development Framework
(CDF) and Poverty Reduction Strategy Papers (PRSP) prepared
by partner countries should incorporate anti-corruption efforts.
2. Both donor and recipient countries are responsible and have a
preventive role to play in developing and implementing
anti-corruption efforts. Donor and partner countries must work
together, building and maintaining credibility by being accountable
to their taxpayers and constituencies in the use of public funds.
Governmental commitment to responsible, transparent financial
systems and procedures are vital aspects of good governance.
3. Recipient countries must develop and control their own pro-
grams and projects, which means they are accountable for
responsibly managing these activities.
4. Partner countries should generate support for anti-corruption
strategies by building a coalition that promotes reform. The range
of stakeholders in donor and partner countries should include
the private sector, civil society, international financial institutions,
multilateral organizations, and international and regional non-
governmental organizations.
257
Recommendations
5. Combating corruption must be a priority and recommendations
from this conference must be action-oriented, sustainable,
cost-effective, and monitored.
Recommendations
While each working group examined a different question, several
recommendations consistently recurred, oftentimes with a different focus
but similar in scope. These common solutions are categorized in the
following areas:
1. Risk Assessment: A regular cost-effective assessment of the risks
of corruption to development assistance should be conducted.
Assessment should take place throughout the development aid
process, starting during the planning stages, continuing through-
out implementation, as well as after the designated completion of
these activities. Donors and partners should carry out joint
reviews and audits of projects, programs, and personnel. Local
assessment should be especially supported.
2. Selectivity: Selectivity should be a guiding principle in programs,
which means development agencies need to focus their efforts on
countries, sectors, and projects, including procedures, where anti-
corruption efforts are more likely to be effective. Civil society
should be selected for increased reliability, performance, and
other comparative advantages especially in circumstances where
governments’ commitment is weak.
3. Transparency: There must be transparency of all joint assistance
efforts. Donors should provide information about the selection of
countries and sectors as well as spending levels. Subcontracting,
accounting, and auditing procedures should be conducted openly
and follow best practice policies.
4. Lessons Learned: It is vital to assess programs and projects after
their completion and share what has been learned, both from the
donors’ and recipient countries’ perspectives. A “virtual resource
center” could facilitate sharing these lessons.
258
Recommendations
5. Performance: More effort is needed to set performance targets for
tackling corruption. Governmental will must be translated into
and measured by performance. Donors should support the
preparation of research data and the development of monitoring
capacity in partner countries. The media can provide assessments
of anti-corruption efforts. Through independent media, intended
beneficiaries can measure performance. Institutions should be
selected based on individual country situations and the ability of
these institutions to perform.
6. Facilitate and foster twinning: Local ownership should be a
priority in aid programs, which means facilitation and support
for local initiatives are essential. Sustainability is an important
factor in deciding which projects to subsidize and therefore,
twinning should be supported. Building links between institu-
tions in the donor and partner countries to promote an exchange
of knowledge and experience can strengthen institutions fighting
to curb corruption. However, twinning can also occur on a
regional basis. For example, countries that have been relatively
successful can share lessons learned with other countries, which
have yet to achieve any measurable progress in their reform
programs.
7. Financial procedures: Donors should provide resources, financial
and education and training, to devise better auditing and
accounting procedures in recipient partner countries. Reforming
these institutional policies and procedures is essential. All
branches of government should be included in this process.
8. Watchdogs: Donors should support institutions that can produce
better watchdogs, focusing not only on the executive but all
branches of government. They must recognize and support the
overriding importance of civil society, particularly an indepen-
dent media.
9. Monitoring: Donors should support creating improved monitor-
ing techniques. Monitoring is an extension of assessment and
259
Recommendations
better methods and procedures should lead to better implemen-
tation and enforcement. However, improved systems require data
from research and polls, both local and regional. Donors should
especially support international policies that include donor peer
review or better monitoring capabilities through OECD’s
Development Assistance Committee (DAC) procedures and
eventually a United Nations’ (UN) convention.
Reports from the Working Groups
Working Group One
1. Donors should help create “clean” countries. “Clean” aid, alone, is
not sufficient.
2. Donors need to jointly build capacity. They should work country
by country to develop an agreement that delineates what consti-
tutes best procurement and financial practices, along with
appropriate sanctions for violators. Institution building measures
must accompany any agreement on procedures.
3. A risk assessment before initiating projects or programs helps
donors and recipients to jointly produce measures that mitigate
risks. Selectivity is crucial. In situations where risks are high and
mitigation is difficult, funding should stop.
4. Temporary procedures to ensure efficient, transparent procure-
ment and financial management will be required in some
countries while reform and capacity building take place. Donors
and partners should jointly agree to these measures rather than
try to impose several different systems. The DAC peer review
should include a provision that encourages donor cooperation.
5. There is a risk that donor policies designed to answer to their
taxpayers’ about development aid can appear to abdicate partner
governments from their responsibility. It is important that partner
governments have ownership of aid and understand they are
accountable to their electorates to responsibly manage that aid.
260
Recommendations
6. Auditing before, after, and during activities is imperative. Donors
should formulate mechanisms that allow them to share audit
outcomes and learn from other’s mistakes.
7. More detailed checking of procurement policies is a vital part of
financial and fiscal accountability. Someone must guarantee that
the funded activity was actually implemented.
8. Since program and project funding both have local outputs, local
people can help police delivery. Donor transparency about
projects and programs is key to confirming delivery is properly
monitored.
9. Political will to combat corruption can come from many sources.
If the partner government lacks the political will, other stakehold-
ers, especially civil society can play a useful, active role. Donors
should support these stakeholders in their anti-corruption
activity, particularly the media.
10. Integrity pacts require further examination to determine their
cost benefit.
11. Sharing blacklists could pose legal problems. Donors need to
consider this approach separately.
12. Hotlines and other reporting mechanisms are potentially valuable
if properly managed. A screening process would help reduce false
accusations. Independent investigations and protecting
whistle-blowers are important elements. Donors should work
individually to create these protections and share lessons in
properly managing hotline-style operations.
13. The private sector can be an ally in combating corruption. Many
companies share the desire to eliminate it and donors should seek
out and work with sympathetic private sector partners.
Working Group Two
1. A strong emphasis on local ownership and control of develop-
ment strategies and programs is important. Donors are increas-
261
Recommendations
ingly willing to contemplate forms of assistance, which promote
budgetary support. The introduction of the CDF and the PRSP
reinforces the partner countries’ leadership and necessitates
improved coordination among development agencies. Utstein
initiatives can promote better coordination but need to be linked
to wider donor efforts wherever possible.
2. Donor coordination: Ideally, the partner country should create
the framework for dialogue with donors. Where this is not yet
taking place, the World Bank and other multilaterals such as the
United Nations Development Programme or the European
Community can provide a focal point. Such agencies can initiate
a donor coalition and framework for interaction and dialogue
with governments. Bilateral donors can actively participate in
these arrangements. Various models are appropriate such as ad
hoc arrangements established and led by different groups of
donors. Another catalyst for action is the Utstein initiatives.
3. Local ownership: The CDF and PRSP processes present opportu-
nities for agencies to link their efforts closely to locally led
development strategies and programs. Countries’ should include
plans for tackling corruption in the CDF and the PRSP. A key
aspect of the fight against corruption is the development of local
capacity to prepare transparent expenditure plans in the budget,
to manage and account for resource use, and to audit the
outcome. Building local capacity to conduct these functions is
crucial and can be done in several ways. Joint government and
donor audits of expenditure are desirable and bodies such as
INTOSAI can assist with strengthening local audit institutions.
4. Alternatives for Policy Dialogue: Developing agencies can be
more effective if their response corresponds to the level of
commitment demonstrated by partner countries. In those
countries where commitment is strong, the focus will be on
strengthening state capacity. Where there is less resolution for
262
Recommendations
reform, agencies may need to undertake anti-corruption work
with non-governmental stakeholders (civil society, private sector,
media etc). Development agencies should concentrate their
efforts on countries where they can make a difference and where
joint donor activity can be the most productive.
5. The International Dimension: Corruption is a global problem
and development agencies can have a more comprehensive affect
if they include an international component in their reform
strategy. The OECD Convention is an important initiative for
tackling corruption. Donors should aggressively support ratifica-
tion and implementation and help establish similar instruments
in other regions. The OECD has also tackled international
money-laundering issues and opportunities are emerging to
produce a regional strategy. The DAC can coordinate and review
development agencies’ policies and practices in the area of
anti-corruption. Reform benefits immensely from lessons learned
and donors should collectively improve their efforts to learn
lessons from existing strategies and more widely share available
information.
6. The Utstein Partners and development agencies generally should
consider:
• supporting partner countries’ poverty reduction strategies that
address governance and propose anti-corruption programs.
Initial efforts should concentrate on collaboration with the
World Bank to finalize a tool kit/sourcebook, which includes
potential anti-corruption initiatives, for the PRSP.
• increasing the level of assistance to countries that can develop
and implement anti-corruption plans in the context of poverty
reduction strategies. Possible mechanisms include the World
Bank Institute.
• financing a virtual resource center that addresses all aspects of
corruption including the exchange of information and best
practice approaches as well as its political dimension.
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Recommendations
• forming a donor working group that supports and reviews
efforts to encourage the OECD’s DAC to coordinate donors’
anti-corruption policies and activities.
• endorsing the World Bank’s efforts to advance an integrated
approach that improves public expenditures’ management and
financial, audit, and procurement systems in partner coun-
tries; and creating toolkits with the World Bank’s input to
develop this approach.
• providing technical assistance and financial support to build
capacity in partner countries using these tool-kits.
Working Group Three
Transparency, credibility, reliability, and ownership are the four
overarching themes that are the core of this working group’s recommen-
dations. There is a need for a Transparency International review of aid
and aid agencies, field research and information on procurement, global,
country specific, and donor data as well as improved accounting proce-
dures. More specifically this group recommends the following:
1. Assess existing data and organizations/entities involved in data
collection on the basis of their reliability, transparency, and
accessibility.
2. Strengthen the existing data capacity and build the capabilities of
new local independent data collection agencies such as govern-
mental institutions and NGOs.
3. Build national, regional, and global databases. At the national
level, data should be collected on an annual or biannual basis
utilizing instruments such as corruption perception and house-
hold surveys, and judicial statistics.
Working Group Four
1. The analysis and diagnostics of the institutional environment is a
useful first step in a participatory process of institution building/
strengthening. A thorough assessment gives countries the data
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Recommendations
needed to approach donors/institutions for assistance that targets
specific strategies, increasing reform programs’ potential for cost
effectiveness. The analyses should include an examination of
existing information and be shared among all relevant donors
and agencies. The costs of such analyses should be low relative to
project costs.
2. Donors should promote twinning/networks of institutions
between North-South and South-South of groups such as
journalists, trade unions, parliamentarians, local governments
and ombudsmen as these networks seem to foster sustained
capacity beyond the project cycle, create opportunities for
cost-sharing, and enlarge political support for development
cooperation.
3. Donor agencies’ should strengthen their expertise to deal with
corruption issues more effectively and, if necessary, conduct
self-assessments that focus on areas such as appropriate
anti-corruption policies in governance, available expertise,
current instruments/approaches, and staff incentives.
Working Group Five
This group’s proposals address how to structure the relationship between
developing and developed countries in combating corruption. They are
based on the underlying principles that corruption represents a failure of
governance; where it is endemic, the impact of poor governance is likely
to be systematic and widespread; and successful anti-corruption strategies
require a holistic approach, which is determined by the circumstances of
each country and may involve:
• reforming political governance and the public sector;
• private sector promotion of responsible business practices and
partnerships;
• restoring a system of checks and balances among the separate
branches of government, executive, legislature, and judiciary;
265
Recommendations
• utilizing the effective advocacy potential of civil society as well as
monitoring by local communities;
• watch dogs inside government such as anti-corruption commis-
sions and ombudsmen;
• supporting the PRSP process and emerging CDF with anti-
corruption efforts;
• including the development of good governance and respect for
human rights in reform strategies as this particular focus provides
an increasingly powerful basis for remobilizing national and
international support; and
• including the political, economic and structural capability of each
country as criteria for selecting projects and programs.
The group’s recommendations are:
1. The primary responsibility for combating corruption must lie
within each country—its government, other institutions of the
state, the private sector, and civil society. Government commit-
ment is vital to success along with its ability to implement new
policies, generate political support, its technical capacity, and its
financial resources. Donor understanding of these constraints
and support in these areas are important.
2. Donor government support should reflect governments’ will to
combat corruption. However, governments should not be
penalized for their current weak performance if they demonstrate
a strong commitment to reform.
3. It may be helpful to develop a sector-wide approach, which could
be known as the “accountability sector.” However, it is important
that this is a joint donor project, including a collective institu-
tional analysis and basket funding to those governments that
demonstrate not only commitment to reform but are also capable
of establishing and implementing reliable accounting and
procurement procedures. Donors should not develop individual
266
Recommendations
programs that support government policies and resources. The
governance program in the Poverty Reduction Strategy Papers
should include an anti-corruption component facilitated by
expanding the corruption information in the World Bank’s
source book on governance and poverty.
Working Group Six
1. Extend the capacity to enforce the OECD convention by increas-
ing awareness and information about the its provisions to
governments, civil society, and particularly the business sector in
recipient countries.
2. Financially support monitoring mechanisms that are incorpo-
rated in the OECD convention.
3. Include aid agencies and activities in peer reviews and OECD
convention monitoring.
4. Encourage recipient countries to develop regional instruments to
fight corruption.
5. Support a UN convention against corruption with special
emphasis on monitoring mechanisms and common standards on
accountability and transparency for both donors and recipient
countries.
Discussion Results
A panel discussion was held on the last day of the conference to share the
working groups’ conclusions and recommendations. Two important and
controversial issues were debated, untying aid and exit strategies and
disengagement. Conference participants discussed how untying aid
increases recipient countries’ management responsibilities but exit
strategies and disengagement tend not only to stymie development but
more important disproportionately affect the poor and disenfranchised.
As an alternative, some proposed a substantial reduction in aid if there is
no performance and little will, but always with the understanding that the
267
Recommendations
possibility to reestablish assistance is available as countries demonstrate a
commitment to reform. However, some participants contend there are
rare cases where the only option is disengagement. These are usually
crises where the international community has decided to take collective
political action. In such cases, no single country has the ability to alter the
situation and donor countries should have exhausted all possible alterna-
tive solutions prior to withdrawal.
Additionally, Working Group One prepared very specific guidelines
for the role of the Supreme Audit Institution (SAI). The following is a
synopsis of that discussion.
Subtheme: The Role and Experience of the Supreme Audit Institution
in Preventing and Detecting Fraud and Corruption
The discussion group emphasized that most SAIs believe their main
contribution with respect to prevention and detection lies in improving
overall transparency and accountability, supporting an environment that
limits opportunities for misconduct, and creating a climate of good
governance. The following issues were among those addressed in the
country papers and the discussion sessions of the congress:
• Strong Financial Management. SAIs think it is critical that they
specifically describe the extent of their role in prevention and
detection. They generally agree that fostering strong financial
management based on reliable, sufficient, and timely reporting
including disclosure of deviations and effective internal control
systems represent the basic elements of their role. A strong
standards framework and the institution of internal auditing and
audit committees provide the bases for their position.
• SAIs’ Mandate. Most SAIs consider their audit mandates sufficient
although some think more investigative powers could be practical.
Normally, they do not have the authority to prosecute acts of
corruption discovered during audits. They discussed the difficulty
in conducting investigations as irregularities usually result from
268
Recommendations
audit work that is not designed to confirm public servants’
improper behavior. Further, some SAIs indicate that specific
investigative authority is unnecessary since the responsibility for
investigation and prosecution lies within the sphere of other
specialized public bodies and within the management of the
audited body itself. These SAIs think they are more effective if they
maintain close collaboration with all the organizations, those
being audited and those charged with prosecutorial power,
identifying better practices and using these practices as indicators.
• Public Service. Another issue that was raised during the debate was
the need for honest, able and well-motivated public servants. In
fact, SAIs discussed selecting public servants exclusively on their
records of integrity and capability. Although few reported the
existence of government-wide formal codes of ethics, many
currently have some set of standards. When establishing a code of
ethics for this purpose such as the INTOSAI Code of Ethics, it was
suggested that certain principles for public servants’ conduct
should be defined, such as integrity, objectivity, impartiality,
honesty, and professionalism.
• Resources. Many SAIs indicated they lacked the necessary resources
to perform their work. This serious problem will have to be
addressed in some manner. Perhaps INTOSAI can be a vehicle to
help address this concern.
Subtheme: Methods and Techniques to Prevent and Detect Fraud
and Corruption
The auditor and his work are significant elements in reducing and
detecting fraud and corruption although the SAIs’ mandates and activi-
ties vary widely. They agree, however, that it is more cost effective to deter
and prevent than to detect and investigate. Some of the more significant
aspects specifically addressed in the country papers and the discussion
sessions follow:
269
Recommendations
• Most want SAI audit reports readily available to the public in a
timely fashion; however, a wide range of practices exist concerning
how and when audit findings are made public.
• They think they should pay more attention to developing their
relationship with the media.
• SAIs recognize that some programs have more inherent control
weaknesses than others, and that these high risk programs by their
nature or function foster an environment that favors fraud and
corruption.
• SAIs generally agree that recommendations are more effective
when they aggressively follow up; however, most reported they do
not have a system to track implementation of recommendations.
• Fraud indicators are usually difficult to identify although generic
indicators are nearly always present and auditors must rely on
technical experience, professional judgement, and a firm under-
standing of how fraud is committed to successfully recognize
them. Most SAIs considered lack of experience and training was
their biggest obstacle in this respect.
• SAIs generally agree they should more closely collaborate to
facilitate exchange of fraud and corruption experiences.
• SAIs’ positions on financial disclosure, public servants’
declaration of assets and interest, vary widely. Some are
convinced of their utility while others believe that disclosure
is ineffectual in preventing abuse. Most reported, however,
that in their countries some form of financial disclosure
reporting, primarily by senior public officials and politicians,
is required. Many stated the government should assume sole
responsibility for reviewing disclosures.
• Although few SAIs had systems in place to receive complaints/
irregularities from the public, many contend such a system can
strengthen a preventive environment and help identify fraudu-
lent activity.
270
Recommendations
The Accords of Montevideo
SAIs agree that fraud and corruption are significant problems affecting all
countries in varying degrees and that the SAIs can and should endeavor
to create an environment that is unfavorable to abuse. As provided in the
Lima Declaration adopted by INTOSAI in 1977, Guidelines in Auditing
Precepts, SAIs agree they should be independent and have adequate
mandates that enable them to effectively contribute to reform. SAIs also
agree that where possible they should
1. seek an adequate level of financial and operative independence
and breadth of audit coverage;
2. take a more active role in evaluating the efficiency and effective-
ness of financial and internal control systems and aggressively
follow up SAI recommendations;
3. focus audit strategy more on areas and operations prone to fraud
and corruption by developing effective high risk indicators;
4. establish an effective means for the public dissemination of audit
reports and relevant information including establishing good
relations with the media;
5. produce relevant audit reports that are understandable and user
friendly;
6. consider increased cooperation and appropriate exchange of
information with other national and international bodies fighting
corruption;
7. intensify the exchange of experiences on fraud and corruption
with other SAIs;
8. encourage the establishment of personnel management proce-
dures for public service that selects, retains, and motivates honest,
competent employees;
9. encourage financial disclosure guidelines for public servants and
monitor compliance as part of the ongoing audit process;
10. use the INTOSAI Code of Ethics to promote higher ethical
standards and a code of ethics for public service;
271
Recommendations
11. consider establishing a well publicized method to receive and
process public information on perceived irregularities;
12. continue work regarding fraud and corruption through
INTOSAI’s existing committees and working groups. For
example, the Auditing Standards Committee will consider these
issues as part of developing implementation guidelines within a
broader standard framework.
274
Conference Participants
The consequences of corruption are no longer disputed. There is a
widening recognition that effective action is required if the world is to
make progress in the urgent task of eradicating poverty and, in particular,
if the international development goals for 2015 are to be achieved.
Developed countries have also acknowledged that grand corruption
in developing countries has its origin in trade with developed countries
and is facilitated by money laundering in international financial systems.
Globalization and increasing interdependence mean that all countries
need to alleviate corruption worldwide.
Our Approach
Primary responsibility for combating corruption belongs to the govern-
ment, civil society,and the private sector of the concerned country. We
attach a high priority to supporting reformists in developing and transi-
tional countries who are committed to action and we encourage them to
work collaboratively.
In our support, the Utstein Partners adopt a similarly collaborative
style in order to reduce the administrative burden associated with
collaborative activities and increase the effectiveness of our efforts. We are
working towards supporting common policies such as harmonizing our
procedures, and providing joint funding, and shared program manage-
ment.
Our aim is also to join with other like-minded development agencies
in pursuing the objective of combating corruption. We wish to work with
the United Nations system, regional development banks, and our fellow
bilateral development agencies. We attach particular importance to
working with the International Monetary Fund and the World Bank.
Bank President, James Wolfensohn, has been the leader in mobilizing
development efforts against corruption. The Comprehensive Develop-
ment Framework and the Poverty Reduction Strategy program provide a
policy framework to effectively pursue anti-corruption strategies.
In our own countries, we work within the government to promote
development objectives in international trade and financial policy. We
275
Conference Participants
collaborate with the private sectors to promote responsible business
practices and encourage mutually supportive links between civil society
on a North/South and South/South basis.
Priorities for Action
In order to improve our understanding of anti-corruption policies and
define our vision for the future, the Government of the Netherlands
organized a working conference on combating corruption in Maastricht
in April 2000. Recommendations from that conference will help guide the
future actions of the International Development Ministers in addition to
the following:
1. We will support programs for governments in developing and
transitional countries committed to reform and combating
corruption. The objective is to help these countries generate
political support for reform, develop technical capability, and
secure financial resources in the area of governance so they can
develop and implement anti-corruption policies. We will provide
this support on a collaborative basis. An Utstein partner will be
the leader in each country on behalf of the other partners. We will
work wherever possible in collaboration with the World Bank and
other like-minded agencies. Plans for such collaboration are now
in progress.
2. Support for civil society, the media, the judiciary and the legisla-
tures to institute and participate in systems of checks and
balances, advocacy and monitoring, and high standards of
corporate governance in the private sector is one of our top
priorities. These actors are especially important to build a
constituency for reform where government lacks commitment.
We will continue to provide support to these actors even in those
cases where we are unable to operate through government
because of its lack of commitment.
3. To reinforce our cooperation and learning, we will establish a
virtual expert center. Its functions will be to coordinate our
276
Conference Participants
anti-corruption activities, develop networks of non-governmen-
tal actors committed to reform, identify sources of expertise in
our countries, exchange expert information, and undertake
critical research. Because Utstein Partners have offered informal
funding, officials are confident that the virtual center can be
financed if Ministers approve it.
4. We will encourage developing country governments to address
governance and corruption issues in all the Poverty Reduction
Strategies Papers (PRSP). We welcome the inclusion of gover-
nance in the World Bank’s guidelines for PRSP and want to
collaborate with all concerned to include a clear focus on
anti-corruption policies and plans within PRSP guidance and
programs.
5. We will work within our own governments to ensure the laws of
the Orangisation of Economic Co-operation and Development
(OECD) Convention on the bribery of foreign public officials are
fully implemented. We will seek ways to strengthen the capacity
of the OECD Secretariat, monitor implementation of the
Convention, and encourage the business community to adopt
effective codes of corporate conduct. We will provide support
where necessary for the efforts of the OECD Financial Action
Task Force to extend anti-money laundering networks to Africa
and Asia.
6. We are ready to help strengthen financial management and
procurement systems in developing countries, particularly those
where several Utstein partners are engaged and to harmonize our
own approaches to procurement in an effort to reduce corruption
risks in international development assistance. There will be many
cases where such strengthening will be a prerequisite for channel-
ing more program development assistance or budgetary support.
We are also ready to act against national companies that have
engaged in corrupt activities. Previously, those companies
277
Conference Participants
involved with multilateral development agencies were conve-
niently excluded from legal repercussions. However, in an effort
to support multilateral agencies’ strategies to reform procurement
processes, we will support legal actions against national enter-
prises that do not comply with anti-corruption policies.
Conclusion
We believe that a commitment to combating corruption is a necessary
basis for an effective development relationship. We have adopted the
measures outlined above to help us fulfill our responsibilities for combat-
ing corruption in development. We welcome the views of our partners
and peers on our plans. We repeat our invitation to governments, civil
society, and the private sector and to other development agencies to join
us in a collaborative approach to this vital enterprise which will serve the
interests of us all.
Notes
1. On 25 and 26 June 1999 the Ministers for Development Cooperation
of the Netherlands, Germany, Norway and the United Kingdom met
on the Norwegian island of Utstein. During this meeting the four
Ministers decided to join forces and intensify their cooperation on a
number of issues. The four ministers have since then become known
as “the Utstein Group.”
273
Statement by the Utstein Group
Combating Corruptionin Development:A Statement bythe Utstein Group1
Our Goal
We, the International Development Ministers of the Netherlands,
Germany, Norway, and the United Kingdom are committed to
reducing the damaging effects of corruption on development. We are
ready to work within governments, civil society, the private sector, and
other development agencies, both multilateral and bilateral, that share
our commitment.
The Problem
Corruption occurs in all regions of the world but it is particularly
harmful to developing countries because they are already the most
vulnerable. Corruption diverts scarce resources from development, deters
investment, and retards economic growth. Corruption undermines
democratic political systems and is a barrier to the delivery of basic
services and the provision of security to the poor.
274
Statement by the Utstein Group
The consequences of corruption are no longer disputed. There is a
widening recognition that effective action is required if the world is to
make progress in the urgent task of eradicating poverty and, in particular,
if the international development goals for 2015 are to be achieved.
Developed countries have also acknowledged that grand corruption
in developing countries has its origin in trade with developed countries
and is facilitated by money laundering in international financial systems.
Globalization and increasing interdependence mean that all countries
need to alleviate corruption worldwide.
Our Approach
Primary responsibility for combating corruption belongs to the govern-
ment, civil society,and the private sector of the concerned country. We
attach a high priority to supporting reformists in developing and transi-
tional countries who are committed to action and we encourage them to
work collaboratively.
In our support, the Utstein Partners adopt a similarly collaborative
style in order to reduce the administrative burden associated with
collaborative activities and increase the effectiveness of our efforts. We are
working towards supporting common policies such as harmonizing our
procedures, and providing joint funding, and shared program manage-
ment.
Our aim is also to join with other like-minded development agencies
in pursuing the objective of combating corruption. We wish to work with
the United Nations system, regional development banks, and our fellow
bilateral development agencies. We attach particular importance to
working with the International Monetary Fund and the World Bank.
Bank President, James Wolfensohn, has been the leader in mobilizing
development efforts against corruption. The Comprehensive Develop-
ment Framework and the Poverty Reduction Strategy program provide a
policy framework to effectively pursue anti-corruption strategies.
In our own countries, we work within the government to promote
development objectives in international trade and financial policy. We
275
Statement by the Utstein Group
collaborate with the private sectors to promote responsible business
practices and encourage mutually supportive links between civil society
on a North/South and South/South basis.
Priorities for Action
In order to improve our understanding of anti-corruption policies and
define our vision for the future, the Government of the Netherlands
organized a working conference on combating corruption in Maastricht
in April 2000. Recommendations from that conference will help guide the
future actions of the International Development Ministers in addition to
the following:
1. We will support programs for governments in developing and
transitional countries committed to reform and combating
corruption. The objective is to help these countries generate
political support for reform, develop technical capability, and
secure financial resources in the area of governance so they can
develop and implement anti-corruption policies. We will provide
this support on a collaborative basis. An Utstein partner will be
the leader in each country on behalf of the other partners. We will
work wherever possible in collaboration with the World Bank and
other like-minded agencies. Plans for such collaboration are now
in progress.
2. Support for civil society, the media, the judiciary and the legisla-
tures to institute and participate in systems of checks and
balances, advocacy and monitoring, and high standards of
corporate governance in the private sector is one of our top
priorities. These actors are especially important to build a
constituency for reform where government lacks commitment.
We will continue to provide support to these actors even in those
cases where we are unable to operate through government
because of its lack of commitment.
3. To reinforce our cooperation and learning, we will establish a
virtual expert center. Its functions will be to coordinate our
276
Statement by the Utstein Group
anti-corruption activities, develop networks of non-governmen-
tal actors committed to reform, identify sources of expertise in
our countries, exchange expert information, and undertake
critical research. Because Utstein Partners have offered informal
funding, officials are confident that the virtual center can be
financed if Ministers approve it.
4. We will encourage developing country governments to address
governance and corruption issues in all the Poverty Reduction
Strategies Papers (PRSP). We welcome the inclusion of gover-
nance in the World Bank’s guidelines for PRSP and want to
collaborate with all concerned to include a clear focus on
anti-corruption policies and plans within PRSP guidance and
programs.
5. We will work within our own governments to ensure the laws of
the Orangisation of Economic Co-operation and Development
(OECD) Convention on the bribery of foreign public officials are
fully implemented. We will seek ways to strengthen the capacity
of the OECD Secretariat, monitor implementation of the
Convention, and encourage the business community to adopt
effective codes of corporate conduct. We will provide support
where necessary for the efforts of the OECD Financial Action
Task Force to extend anti-money laundering networks to Africa
and Asia.
6. We are ready to help strengthen financial management and
procurement systems in developing countries, particularly those
where several Utstein partners are engaged and to harmonize our
own approaches to procurement in an effort to reduce corruption
risks in international development assistance. There will be many
cases where such strengthening will be a prerequisite for channel-
ing more program development assistance or budgetary support.
We are also ready to act against national companies that have
engaged in corrupt activities. Previously, those companies
277
Statement by the Utstein Group
involved with multilateral development agencies were conve-
niently excluded from legal repercussions. However, in an effort
to support multilateral agencies’ strategies to reform procurement
processes, we will support legal actions against national enter-
prises that do not comply with anti-corruption policies.
Conclusion
We believe that a commitment to combating corruption is a necessary
basis for an effective development relationship. We have adopted the
measures outlined above to help us fulfill our responsibilities for combat-
ing corruption in development. We welcome the views of our partners
and peers on our plans. We repeat our invitation to governments, civil
society, and the private sector and to other development agencies to join
us in a collaborative approach to this vital enterprise which will serve the
interests of us all.
Notes
1. On 25 and 26 June 1999 the Ministers for Development Cooperation
of the Netherlands, Germany, Norway and the United Kingdom met
on the Norwegian island of Utstein. During this meeting the four
Ministers decided to join forces and intensify their cooperation on a
number of issues. The four ministers have since then become known
as “the Utstein Group.”
287
Conference Participants
Conference Participants
Al Haji Muhammad Abdullah
Serious Fraud Office
Old Parliament House
Accra, Ghana
Heather Baser
Canadian International Development Agency
P.Q. Hull, Canada
Per Øyvind Bastøe
Norwegian Agency for Development
Oslo, Norway
Bas Berends
Ministry of Foreign Affairs
The Hague, Netherlands
288
Conference Participants
Suzanne Blankhart
Ministry of Foreign Affairs
The Hague, Netherlands
Giorgio Blundo
Graduate Institute for Development Studies
Geneva, Switzerland
Guro Bull
Ministry of Foreign Affairs
Oslo, Norway
Lala Camerer
Institute for Security Studies
Cape Town, South Africa
Ana Maria Campero
Defensora del Pueblo de Bolivia
La Paz, Bolivia
Jeremy Clarke
Department for International Development
London, United Kingdom
Claire Daams
Faculty of Law Basel University
Basel, Switzerland
Glynis Davies
Department for International Development
London, United Kingdom
289
Conference Participants
Koen J.E. de Feyter
University of Maastricht
Maastricht, Netherlands
Peter de Haan
Ministry of Foreign Affairs
The Hague, Netherlands
D. de Jong
Ministry of Justice
The Hague, Netherlands
Louk de la Rive Box
European Centre for Development Management
Maastricht, Netherlands
Boris Divjak
Prosperitet–International Consulting Partners
Bosnia, Herzegovina
Robert A. Doig
Liverpool Business School
Liverpool, United Kingdom
Franziska Donner
Deutsche Gesellschaft Tech. Zusammenarbeit
Eschborn, Germany
Bartlet Édes
Communications
SIGMA
Paris, France
290
Conference Participants
Peter Eigen
Transparency International
Berlin, Germany
Hansjörg Elshorst
Transparency International
Berlin, Germany
Maarten B. Engwirda
European Court of Auditors
Luxembourg, Germany
Thomas Feeley
United States Agency for International Development
Washington, D.C.
Cynthia Fontenova
World Customs Organization
Brussels, Belgium
Ferdinand Francken
Ministry of Foreign Affairs
The Hague, Netherlands
Lara Gabriel
Ministry of Foreign Affairs
The Hague, Netherlands
Huguette Bokpé Gnacadja
Female Lawyer’s Association of Benin
Cotonou, Republic of Benin
291
Conference Participants
Annette Gosses
Ministry of Foreign Affairs
The Hague, Netherlands
Cheryl Gray
Public Sector Group
World Bank
Washington, D.C.
Candido Grzybowski
The Brazilian Institute of Social and Economy
Rio de Janeiro, Brazil
Geert Heikens
European Commission
Brussels, Belgium
Janne Heiskanen
OSCE Secretariat
Vienna, Austria
Eveline Herfkens
Ministry of Foreign Affairs
The Hague, Netherlands
Ric Hettinga
Ministry of Foreign Affairs
The Hague, Netherlands
Edward Hoseah
Prevention of Corruption Bureau
Dar es Salaam, Tanzania
292
Conference Participants
Paul Isemnan
Organisation for Economic Co-operation & Development
Paris, France
Fu Jie
Minister of Supervision
China
Brenda Juntunen
World Bank Institute
Washington, D.C.
Sanne Kaasjager
Ministry of Foreign Affairs
The Hague, Netherlands
Julius Kandie
Attorney General’s Chamber
Nairobi, Kenya
Matts Karlsson
World Bank
Washington, D.C.
Daniel Kaufmann
World Bank Institute
Washington, D.C.
Wilhelm Kellner
1NTOSAI–Austrian Court Audit
Vienna, Austria
293
Conference Participants
Lawrence Kilimwiko
Association of Journalists and Media Workers
Dar Es Salaam, Tanzania
U. Klrvstad
Ministry of Foreign Affairs
Oslo, Norway
Musikari Kombo
National Assembly of Kenya
Nairobi, Kenya
Sahr Kpundeh
World Bank Institute
Washington, D.C.
Steven Langdon
Parliamentary Centre
Ottawa, Canada
Petter Langseth
United Nations–CICP
Vienna, Austria
Marco Leidekker
Ministry of Justice
Schedeldoekshaven 100
The Hague, The Netherlands
Hua Lemeng
The Hague, Netherlands
294
Conference Participants
Janvier Litse
African Development Bank
Abidjan, Côte d’Ivoire
Stephen Lord
General Accounting Office
Washington, D.C.
Betty C. Maina
Institute of Economic Affairs
Nairobi, Kenya
Nick Manning
World Bank
Washington, D.C.
Aileen Marshall
Global Coalition for Africa
Washington, D.C.
Ine Måreng
Ministry of Foreign Affairs
Oslo, Norway
Mette Masst
Norwegian Agency for Development
Oslo, Norway
Miria R.K. Matembe
Ministry for Ethics and Integrity
Kampala, Uganda
295
Conference Participants
Weredewold Woldie Menshu
Ministry of Justice
Addis Ababa, Ethiopia
Sigrun Mrgedal
Ministry of Foreign Affairs
Oslo, Norway
Erich O. Ogoso
Nation Media Group
Kampala, Uganda
Ahmedou Ould-Abdallah
Global Coalition for Africa
Washington, D.C.
Kjetil Paulsen
Ministry of Foreign Affairs
Oslo, Norway
Peter Pedersen
Asian Development Bank
Manila, Philippines
Tilmann Pfleiderer
German Investment and Development Company
Kö1n, Germany
Shafiur Rahman
Islamabad, Pakistan
296
Conference Participants
Franck Rasmussen
Swedish International Development Agency
Stockholm, Sweden
Koos Richelle
Ministry of Foreign Affairs
The Hague, Netherlands
Justice Aaron Ringera
Kenya Anti-Corruption Authority
Nairobi, Kenya
Signe Röpke
Ministry of Foreign Affairs
Copenhagen, Denmark
Camilla Rrssaak
Norwegian Agency for Development
Oslo, Norway
Augustine Ruzindana
Parliament
Kampala, Uganda
Jürgen Schmid
Federal Ministry for Economy and Development
Bonn, Germany
Ute Seela
Ministry of Foreign Affair
The Hague, Netherlands
297
Conference Participants
Shuwang Shao
Ministry of Supervision
Beijing, China
Vijay Shunglu
Office of Comptroller & Auditor General
New Delhi, India
Christoph Sigrist
Kreditanstalt für Wiederaufbau
Frankfurt/Main, Germany
Maureen Silos
Moiwana’86–Human Rights Organization
Paramaribo, Suriname
Rick Stapenhurst
World Bank Institute
Washington, D.C.
Pieter Stek
World Bank
Washington, D.C.
Albrecht Stockmayer
Deutsche Gesellschaft Tech. Zusammenarbeit
Eschborn, Germany
Pauline Tamesis
United Nations Development Programme
New York, New York
298
Conference Participants
Elisabeth Thioléron
Organisation for Economic Co-operation and Development
Paris, France
Massimo Tommasoli
Organisation for Economic Co-operation and Development
Paris, France
Michel van Hulten
Lelystad, Netherlands
Puk van der Linde
Ministry of Economic Affairs
The Hague, The Netherlands
Henk van der Vegt
Ministry of Foreign Affairs
The Hague, Netherlands
N. Vittal
Government of India
New Delhi, India
Nelleke Kruijs Voorberge
Ministry of Foreign Affairs
Den Haag, The Netherlands
Rengen Wang
Beijing Municipal Supervision Bureau
Beijing, China
299
Conference Participants
Ewa Westman
Swedish International Development Agency
Stockholm, Sweden
John Wiebler
US Agency for International Development
Washington, D.C.
Roger Wilson
Department for International Development
London, United Kingdom
Lindiwe Zulu
Department of Foreign Affairs
Pretoria, South Africa
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About the Contributors
About the Contributors
Heather Baser is a senior policy advisor concentrating on capacity and
institutional development and anti-corruption activities for the Canadian
International Development Agency. She has advised international
organizations and governments such as the World Bank, the Dutch
government, and the United Nations Development Programme on new
aid modalities and terms of engagement. Among her publications are
“Working Together to Fight Corruption—State, Society and the Private
Sector in Partnership,” which she coauthored with Robert Klitgaard in
Governance Innovations: Lessons in Experience (1997) and Review of
Technical Assistance Loans in the World Bank, with Peter Morgan and
Nimrod Raphaeli (1996).
Per Øyvind Bastøe is managing director and consultant for the
Norwegian Agency for Development. His consultant services range from
governance, evaluation, and result-based management to organizational
change, and knowledge and human resource management. He is the
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About the Contributors
author of several books on planning, budgeting, organizational develop-
ment, and social sector improvement. His last book, The Changing
Organization, was published in 1995 both Norway and Sweden.
Lala Camerer is senior researcher for the Institute for Security Studies,
an independent applied policy research institute in South Africa. She
specializes in issues dealing with corruption, commercial crime, and
criminal victimization and is currently heading a project on anti-
corruption strategies. As a consultant, she has been asked to examine
ethics in African public service for the UNDESA project.
Jeremy G. Clarke is deputy chief governance advisor on Africa policy
and economics for Great Britain’s Department for International Develop-
ment. His research has focused on Eastern and Southern Africa and the
Pacific in the areas of economic policy and management; public sector
management and reform; institutional development and change manage-
ment in the public sector; and anti-corruption policy analysis and project
appraisal. He served on the Prime Minister’s task force, Africa Partnership
Initiative 2000 and has authored several books on public sector manage-
ment including New Public Management and Development: The Case of
Public Service Reform in Tanzania and Uganda and The Internationalisation
of Public Management—Reinventing the Third World State.
Patrick Conway teaches graduate level courses in international trade,
finance and economic development at the University of North Carolina.
He is the author of numerous publications in the areas of international
economics and economic development. His research focuses on the
international aspects of transition for former Soviet economies; the
macroeconomic impact of IMF adjustment programs; and the theoretical
explanations and empirical implications of international trade between
developed and developing countries. He has served as a Peace Corps
volunteer in Côte d’Ivoire and a research fellow at the Brookings Institu-
tion in Washington, D.C.
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About the Contributors
Glynis Davies is responsible for Great Britain’s Department for Interna-
tional Development’s procurement policy and is currently working on
improving the transparency, efficiency, and effectiveness of its procure-
ment practices.
Hansjörg Elshorst is managing director of Transparency International.
Throughout his career, he has combined his interests in social science and
economics working as senior advisor to the World Bank in strategy and
resource management in East Asia. He was also a journalist for several
Munich newspapers, assisted in the German Parliament, and managed
the German Agency for Technical Cooperation. He speaks several
languages including German, English, French, and Spanish.
Eveline Herfkens is the Netherlands’ Minister for Development
Cooperation. Her many years of government service began as a develop-
ment cooperation policy officer in the Ministry of Foreign Affairs; and
continued as a member of the Lower House of the States General, a
committee member and treasurer of Parliamentarians for Global Action,
and a Labour Party council member. She has chaired the Dutch Fair
Trade Organization and was Executive Director of the World Bank. Her
expertise and commitment to development were catalysts to join her
colleagues in the creation of the Utstein Group, four ministers working
collaboratively to reduce the damaging effects of corruption in develop-
ing countries.
Mats Karlsson is vice president for external affairs and a member of the
World Bank senior management team responsible for corporate leader-
ship and strategy. He manages the Bank’s global communications
programs, which consists of outreach to key constituencies such as
government officials, parliamentarians, NGOs, national and multina-
tional corporations, and academics. Prior to joining the Bank, he was the
state secretary for the International Development Co-operation at the
Swedish Ministry of Foreign Affairs.
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About the Contributors
Daniel Kaufmann is senior manager at the World Bank Institute. He is
a researcher and advisor in the fields of governance, finance, and regula-
tory reform and has designed new empirical governance methodologies
with World Bank colleagues. State leaders, senior officials, and civil
society frequently consult him on strategies to improve governance. He
has published in leading economic and public policy journals. Among
those publications are “Governance Matters: From Measurement to
Action” with A. Kraay and P. Zoido-Lobaton in Finance & Development
(2000); “Are Foreign Investors and Multinationals Engaging in Corrupt
Practices in Transition Economies? “ with J. Hellman and G. Jones in
Transition (2000); and “Why do firms hide? Bribes and Unofficial Activity
After Communism” with S. Johnson, J. McMillan and C. Woodruff in
Journal of Public Economics (2000).
Wilhelm Kellner is director general of the Austrian Court of Audit. He
supervises audits of major government entities including the Federal
Chancellery, and the Ministries for Foreign Affairs, Social Security and
Generations, Public Services and Sports, and National Defence. He is a
member of the General Secretariat of the International Organisation of
Supreme Audit Institutions and specializes in helping to shape the role of
these institutions in the fight against fraud and corruption.
Sahr J. Kpundeh is a member of the governance team in the World
Bank Institute. He has been a consultant to the United States Agency for
International Development, the United Nations Development
Programme, and several other commercial firms on issues relating to
anti-corruption and good governance. He is the author of Politics and
Corruption in Africa: A Case Study of Sierra Leone (1995); coauthor of
USAID Handbook for Fighting Corruption (1998); coeditor of Corruption
and Integrity Improvement Initiatives in Developing Countries (1998);
coeditor of Curbing Corruption: Toward a Model for Building National
Integrity (1999); and editor, Democratization in Africa: African Views,
African Voices (1992).
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About the Contributors
Steve Langdon is senior associate at the Parliamentary Centre, Ottawa,
Canada. He directs economic policy and governance projects. Currently,
as a member of the World Bank team he is negotiating reconstruction
credit with Nigeria, focusing on transparency strategies. His work in sub-
Saharan Africa, Bangladesh, the New Independent States, Thailand,
Canada, and Mexico has examined key governance issues such as
strengthening democratic institutions, public sector reform, and anti-
corruption strategies. He is the author of several publications including
Global Poverty, Democracy and North-South Change (1999);“Industrial
Dependence and Export Manufacturing in Kenya,” Africa in Economic
Crisis (1986); Industrial Adjustment and Trade Relations with Less-
Developed Countries (1978).
Mette Masst is assistant director for the Norwegian Agency for
Development, and manager of the its good governance and anti-
corruption project. She has also worked for the Agency in Zimbabwe
and Mozambique.
Rick Stapenhurst is a member of the governance team at the World
Bank Institute concentrating on issues in accountability and integrity,
political risk analysis, investment decision making, government policy
development and implementation, and institutional analysis and assess-
ment. He has worked throughout sub-Saharan Africa, as well as the Asia
Pacific and Eastern Europe. His publications include Political Risk Around
the North Atlantic (1993), Industrial Democracy Today (1979), and numer-
ous articles in the business and academic press. Before coming to the World
Bank, he was the director of Multilateral Development Banks at the
Canadian International Development Agency and an adjunct professor for
international marketing at the University of Ottawa and McGill University.
Albrecht Stockmayer directs the Organisation for Economic Co-
operation and Development-PUMA’s outreach programs as well as the
OECD’s governance outreach initiative in Paris. He has published several
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About the Contributors
books and articles on the law and finance highlighting international
investment, decentralization, and corruption. He has advised the World
Bank, the United Nations, the European Union, and numerous African
and Latin American countries primarily in the area of institutional
development of core public sector institutions.
Michael Wiehen is a member of the board of directors for Transpar-
ency International, Deutschland. For more than thirty years, he served the
World Bank in its legal department and various management positions,
among them country director for Southeastern Europe, South Asia and
Eastern and Southern Africa. His vast experience has contributed to the
development of the integrity pact concept and he has been asked to
monitor developments at the OECD. He is a member of the Munich Bar
and serves as a trustee of the Mountain Institute, which advances and
seeks to preserve mountain cultures and environments in Appalachia, the
Himalayas and the Andes.
Ugljesa Zvekic is senior crime prevention and criminal justice expert for
the Southern Africa Regional Office of the United Nations Crime Preven-
tion and Criminal Justice Programme. His current activities focus on
information capacity building for informed decision-making and interna-
tional standards and norms. He is a permanent visiting professor in the
methodology of social science research in Belgrade and the honorary
professor of criminology at the University of Hull, United Kingdom. He has
published extensively in the areas of crime prevention, development and
crime, corrections, victimization surveys and corruption.